As filed with the Securities and Exchange Commission on March 2, 2004

                                                     Registration No. 333-______

                       SECURITIES AND EXCHANGE COMMISSION
                              WASHINGTON, DC 20549
                                   ___________

                                    FORM S-3
                          REGISTRATION STATEMENT UNDER
                           THE SECURITIES ACT OF 1933

                            HERSHA HOSPITALITY TRUST
             (Exact Name of Registrant as Specified in its Charter)

                MARYLAND                                     251811499
     (State or other jurisdiction of                     (I.R.S. Employer
      incorporation or organization)                    Identification No.)

                            148 SHERATON DRIVE, BOX A
                       NEW CUMBERLAND, PENNSYLVANIA 17070
                                 (717) 770-2405
          (Address, Including Zip Code, and Telephone Number, including
             Area Code, of Registrant's Principal Executive Offices)

                                ASHISH R.  PARIK
                             CHIEF FINANCIAL OFFICER
                            148 SHERATON DRIVE, BOX A
                       NEW CUMBERLAND, PENNSYLVANIA 17070
                                 (717) 770-2405
                (Name, Address, Including Zip Code, and Telephone
               Number, Including Area Code, of Agent for Service)
                                   ___________

                                   COPIES TO:

                             CAMERON N.  COSBY, ESQ.
                             RANDALL S.  PARKS, ESQ.
                              HUNTON & WILLIAMS LLP
                          RIVERFRONT PLAZA, EAST TOWER
                               951 E.  BYRD STREET
                          RICHMOND, VIRGINIA 23219-4074
                                 (804) 788-8200
                           (804) 788-8218 (FACSIMILE)
                                   ___________

     APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon as
practicable  after  the  effective  date  of  this  Registration  Statement.

If  the only securities being registered on this form are being offered pursuant
to  dividend  or interest reinvestment plans, please check the following box.[ ]

If  any  of  the securities being registered on this form are to be offered on a
delayed  or  continuous  basis  pursuant to Rule 415 under the Securities Act of
1933, other than securities offered only in connection with dividend or interest
reinvestment  plans,  check  the  following  box.[X]

If this Form is filed to register additional securities for an offering pursuant
to  Rule 462(b) under the Securities Act of 1933, please check the following box
and  list  the  Securities  Act  registration  statement  number  of the earlier
effective  registration  statement  for  the  same  offering.[ ]

If  this  Form is a post-effective amendment filed pursuant to Rule 462(c) under
the  Securities Act of 1933, check the following box and list the Securities Act
registration  statement  number  of the earlier effective registration statement
for  the  same  offering.[ ]

     If  delivery of the prospectus is expected to be made pursuant to Rule 434,
please  check  the  following  box.[ ]



                                             CALCULATION OF REGISTRATION FEE

========================================================================================================================
                                            PROPOSED MAXIMUM   PROPOSED MAXIMUM         AMOUNT
                                              AMOUNT BEING      OFFERING PRICE    AGGREGATE OFFERING    OF REGISTRATION
TITLE OF SECURITIES BEING REGISTERED           REGISTERED        PER SHARE(1)            PRICE              FEE(2)
------------------------------------------  ----------------  ------------------  -------------------  -----------------
                                                                                           

Common Shares of Beneficial Interest, $.01
   par value, issuable upon redemption of
   Series A Preferred Units                        2,816,460  $            11.08  $     31,206,376.80  $           3,954
========================================================================================================================

(1)  Estimated  solely for the purpose of determining the registration fee.  This amount was calculated in accordance
     with  Rule 457(c) of the Securities Act of 1933, as amended, based on the average of the high and low sale prices
     of the registrant's  common  shares  of  beneficial  interest  as reported on the American Stock Exchange on
     February 25, 2004.

(2)  Calculated in accordance with Rule 457(o) under the Securities Act of 1933, as amended.


================================================================================
     The  Registrant  hereby  amends this Registration Statement on such date or
dates as may be necessary to delay its effective date until the Registrant files
a  further  amendment which specifically states that this Registration Statement
will  thereafter  become  effective  in  accordance  with  Section  8(a)  of the
Securities  Act,  or  until the Registration Statement becomes effective on such
date  as  the  Commission,  acting pursuant to said Section 8(a), may determine.



The  information  in this prospectus is not complete and may be changed.  We may
not  sell  these  securities  until  the  registration  statement filed with the
Securities  and  Exchange  Commission  is  effective.  This prospectus is not an
offer  to  sell  these  securities  and  is not soliciting an offer to buy these
securities  in  any  state  where  the  offer  or  sale  is  not  permitted.
The  information  in this prospectus is not complete and may be changed.  We may
not  sell  these  securities  until  the  registration  statement filed with the
Securities  and  Exchange  Commission  is  effective.  This prospectus is not an
offer  to  sell  these  securities  and  is not soliciting an offer to buy these
securities  in  any  state  where  the  offer  or  sale  is  not  permitted.

                   SUBJECT TO COMPLETION, DATED MARCH 2, 2004


                            HERSHA HOSPITALITY TRUST

                                     [LOGO]


                 2,816,460 COMMON SHARES OF BENEFICIAL INTEREST

     This  prospectus  relates  to  up  to 2,816,460 common shares of beneficial
interest  which  may  be  offered from time to time by CNL Hospitality Partners,
L.P.,  or  "CNL."

     We  may issue the 2,816,460 common shares covered by this prospectus to CNL
to  the extent that it exchanges Series A preferred units of limited partnership
interest  in  our operating partnership, Hersha Hospitality Limited Partnership,
for  such  common  shares  in  accordance  with  the  operating  partnership's
partnership  agreement.  CNL  currently owns 190,266 Series A preferred units of
limited  partnership  interest  in  our  operating partnership, each of which is
exchangeable  at  any  time,  at  the  option  of  the  holder, for (among other
securities) approximately 14.8 common shares, based on an initial exchange price
of $6.7555 per common share.  We will not receive any of the proceeds from sales
of  common  shares  issued  upon  exchange  of  the  Series  A  Preferred Units.

     The  registration  of  the common shares issuable upon exchange of Series A
preferred units does not necessarily mean that any of them will be issued by us.
Common  shares  resold by CNL under this prospectus may be offered and sold from
time  to  time  in  open  market  or  privately-negotiated transactions that may
involve  underwriters,  brokers  or  dealers.

     Our  common  shares  are  listed  on  the American Stock Exchange under the
symbol  "HT."  The last reported sale price of our common shares on the American
Stock  Exchange  on  February  25,  2004  was  $11.16  per  share.


                           ___________________________

     INVESTING  IN  OUR  COMMON  SHARES  INVOLVES  RISKS.  SEE  "RISK  FACTORS"
BEGINNING  ON  PAGE  5  FOR  CERTAIN  FACTORS  THAT  YOU  SHOULD CONSIDER BEFORE
PURCHASING  OUR  COMMON  SHARES.


                           ___________________________

     In  part  so  that  we can continue to qualify as a "real estate investment
trust"  under  the  federal  income tax laws, our declaration of trust generally
does  not  permit anyone to own more than 9.9% of our outstanding common shares.


                           ___________________________

     NEITHER  THE  SECURITIES  AND  EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED OF THESE SECURITIES OR DETERMINED IF THIS
PROSPECTUS  IS  TRUTHFUL  OR  COMPLETE.  ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL  OFFENSE.


                           ___________________________

                   The date of this prospectus March __, 2004.



                                TABLE OF CONTENTS

HOW TO OBTAIN MORE INFORMATION . . . . . . . . . . . . . . . . . . . . . . . . 1
INCORPORATION OF INFORMATION FILED WITH THE SEC. . . . . . . . . . . . . . . . 1
ABOUT THIS PROSPECTUS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
FORWARD LOOKING INFORMATION. . . . . . . . . . . . . . . . . . . . . . . . . . 2
CERTAIN DEFINITIONS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
OUR COMPANY. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
RISK FACTORS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
USE OF PROCEEDS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
SELLING SHAREHOLDER. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .16
DESCRIPTION OF SHARES OF BENEFICIAL INTEREST . . . . . . . . . . . . . . . . .19
CERTAIN PROVISIONS OF MARYLAND LAW AND OF OUR DECLARATION OF TRUST AND
     BYLAWS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .23
CNL STRATEGIC ALLIANCE . . . . . . . . . . . . . . . . . . . . . . . . . . . .26
FEDERAL INCOME TAX CONSEQUENCES OF OUR STATUS AS A REIT. . . . . . . . . . . .32
PLAN OF DISTRIBUTION . . . . . . . . . . . . . . . . . . . . . . . . . . . . .52
EXPERTS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .53
LEGAL MATTERS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .53


     You  should  rely  only  on  the  information  contained or incorporated by
reference  in this prospectus and any applicable prospectus supplement.  We have
not authorized anyone else to provide you with different information.  If anyone
provides  you with different or inconsistent information, you should not rely on
it.  We  will  not make an offer to sell these securities in any state where the
offer  or  sale  is  not  permitted.  You  should  assume  that  the information
appearing  in  this  prospectus,  as well as the information we previously filed
with  the  SEC and incorporated by reference, is accurate only as of the date of
the  documents  containing  the  information.




                                        i

                         HOW TO OBTAIN MORE INFORMATION

     We  file  annual, quarterly and special reports, proxy statements and other
information  with the Securities and Exchange Commission.  You may read and copy
any reports, statements, or other information we file with the SEC at its public
reference  room  in  Washington,  D.C.  (450 Fifth Street, N.W.  20549).  Please
call  the  SEC at 1-800-SEC-0330 for further information on the public reference
room.  Our  filings  are also available to the public on the internet, through a
database  maintained  by  the  SEC  at http://www.sec.gov.  In addition, you can
inspect  and  copy  reports,  proxy  statements and other information concerning
Hersha Hospitality Trust at the offices of the American Stock Exchange, Inc., 86
Trinity  Place,  New  York,  New York 10006, on which our common shares (symbol:
"HT")  are  listed.

                 INCORPORATION OF INFORMATION FILED WITH THE SEC

     The  SEC  allows  us to "incorporate by reference" into this prospectus the
information  we  file  with  the SEC, which means that we can disclose important
business,  financial  and  other  information  to  you by referring you to other
documents  separately  filed  with  the  SEC.  All  information  incorporated by
reference  is  part  of  this  prospectus,  unless and until that information is
updated  and  superseded  by the information contained in this prospectus or any
information  incorporated  later.  We  incorporate  by  reference  the documents
listed  below  and any future filings we make with the SEC under Sections 13(a),
13(c),  14  or  15(d)  of  the  Securities Exchange Act of 1934, as amended (the
"Exchange  Act"),  prior  to  completion  of  this  offering.

     We incorporate by reference the documents listed below:

     1.   Annual  Report  on  Form  10-K  for the fiscal year ended December 31,
          2002.

     2.   Quarterly  Report  on  Form 10-Q for the quarter ended March 31, 2003.

     3.   Quarterly  Report  on  Form  10-Q for the quarter ended June 30, 2003.

     4.   Quarterly  Report  on  Form  10-Q  for the quarter ended September 30,
          2003.

     5.   Definitive Proxy Statement on Schedule 14A filed with the SEC on April
          11,  2003.

     6.   Current  Reports on Form 8-K filed with the SEC on July 9, 2003, April
          23,  2003  and  April  9,  2003.

     We  also  incorporate  by reference all future filings we make with the SEC
between  the  date of this prospectus and the date upon which we sell all of the
securities  we  offer  with  this  prospectus  and  any  applicable  supplement.

     You may obtain copies of these documents at no cost by requesting them from
us  in  writing at the following address: Hersha Hospitality Trust, 148 Sheraton
Drive, Box A, New Cumberland, PA 17070, telephone (717) 770-2405.

                              ABOUT THIS PROSPECTUS

     This  prospectus  is  part  of a registration statement on Form S-3 that we
filed  with  the  Securities and Exchange Commission under the Securities Act of
1933, as amended.  This prospectus and any accompanying prospectus supplement do
not  contain all of the information included in the registration statement.  For
further  information,  we refer you to the registration statement, including the
exhibits.  Statements  contained  in  this  prospectus  and  any  accompanying
prospectus supplement about the provisions or contents of any agreement or other
document  are  not  necessarily  complete.  If  the rules and regulations of the
Securities  and  Exchange  Commission require that such agreement or document be
filed  as an exhibit to the registration statement, please see such agreement or
document  for  a  complete  description of these matters.  You should not assume
that the information in this prospectus or any prospectus supplement is accurate
as of any date other than the date on the front of such prospectus or prospectus
supplement.


                                        1

                           FORWARD LOOKING INFORMATION

     This  prospectus  and  the  information  incorporated  by reference into it
contains  certain "forward-looking statements" within the meaning of Section 27A
of  the  Securities  Act  of 1933, as amended, and Section 21E of the Securities
Exchange  Act  of  1934,  as  amended, including, without limitation, statements
containing  the  words  "believes,"  "anticipates,"  "expects,"  "estimates,"
"intends," "plans," "projects," "will continue" and words of similar import.  We
have  based  these  forward-looking  statements  on our current expectations and
projections  about future events and trends affecting the financial condition of
our business, which may prove to be incorrect.  These forward-looking statements
relate  to future events and our future financial performance, and involve known
and  unknown  risks,  uncertainties and other factors which may cause our actual
results,  performance,  achievements  or  industry  results  to  be  materially
different  from  any  future  results,  performance or achievements expressed or
implied  by  such  forward-looking statements.  You should specifically consider
the  factors  identified  under the caption "Risk Factors" and the various other
factors  identified in or incorporated by reference into this prospectus and any
other  documents  filed  by  us  with the SEC that could cause actual results to
differ  materially  from  our  forward-looking  statements.

     Except to the extent required by applicable law, we undertake no obligation
to,  and  do  not  intend  to, update any forward-looking statement or the "Risk
Factors"  or  to  publicly  announce  the  result of any revisions to any of the
forward-looking  statements  contained  herein  to  reflect  future  events  or
developments.  There are a number of risk factors associated with the conduct of
our  business,  and  the  risks  discussed in the "Risk Factors" section of this
prospectus may not be exhaustive. New risks and uncertainties arise from time to
time, and it is impossible for us to predict these events or how they may affect
us.  All  forward-looking  statements  should  be  read  with  caution.

                               CERTAIN DEFINITIONS

     Unless  otherwise indicated, the terms "Hersha," "we," "us," "our" and "our
company"  refer  to  Hersha  Hospitality  Trust  and its subsidiaries, including
Hersha  Hospitality  Limited  Partnership.

     All  brand names, trademarks and service marks appearing in this prospectus
are the property of their respective owners. This prospectus supplement contains
registered  trademarks  owned  or licensed to companies other than us, including
but  not  limited  to  Comfort  Inn(R),  Comfort  Suites(R),  Courtyard(R)  by
Marriott(R),  Doubletree  Suites(R),  Fairfield  Inn(R)  by Marriott(R), Hampton
Inn(R),  Hilton  Garden  Inn(R),  Holiday  Inn(R), Homewood Suites by Hilton(R),
Mainstay  Suites(R),  Residence  Inn(R) by Marriott(R) and Sleep Inn(R), none of
which, in any way, are participating in or endorsing this offering and shall not
in  any  way  be  deemed an issuer or underwriter of the securities issued under
this  prospectus,  and  shall  not  have any liability or responsibility for any
financial statements or other financial information contained or incorporated by
reference  in  this  prospectus.



                                        2

                                   OUR COMPANY

     Hersha  Hospitality Trust is a self-advised Maryland real estate investment
trust  that  was  organized in 1998 and completed its initial public offering in
January  of  1999.  We  focus  primarily  on  owning and operating high quality,
mid-scale  limited  service  hotels in established markets in the Eastern United
States.  Our  primary strategy is to continue to acquire high quality, mid-scale
hotels  in  metropolitan markets with high barriers to entry in the Northeastern
United  States.  As  of  February  2004, our portfolio currently consisted of 22
hotels  with a total of 2,168 rooms located in Pennsylvania, New York, Maryland,
Georgia  and  New  Jersey,  which  operate under leading brands, such as Hampton
Inn(R),  Hilton  Garden  Inn(R),  Holiday  Inn(R),  Holiday  Inn  Express(R),
DoubleTree(R),  and  Comfort  Suites(R).

     We  are  structured  as an umbrella partnership REIT, or UPREIT, and we own
our  hotels  through  our  operating  partnership,  Hersha  Hospitality  Limited
Partnership,  for  which  we  serve  as  general  partner. All of our hotels are
managed  by  Hersha Hospitality Management, L.P., or HHMLP, a private management
company  owned  by  certain  of  our  trustees,  officers  and other third party
investors.  In  response  to  tax law changes, we recently formed a wholly-owned
taxable  REIT  subsidiary, or TRS, to which we currently lease twelve hotels and
to  which  we intend to lease all of our hotels, including hotels we may acquire
in  the  future  and hotels currently leased to HHMLP as those leases expire. We
believe  that  transitioning  to  this TRS structure positions us to participate
more  directly  in  the  operating efficiencies and revenue gains at our hotels.

     In April of 2003, we entered into a strategic alliance with CNL Hospitality
Partners, L.P., a subsidiary of CNL Hospitality Properties, Inc. CNL is a public
company  which  has  been one of the most active investors in lodging properties
over the past several years. The strategic alliance positions us as one of CNL's
preferred  partners  for  investing  in mid-scale hotels. Our agreement with CNL
provides  that it will invest up to $25 million in our operating partnership and
up  to  $40  million  in a newly formed hotel acquisition joint venture. CNL has
currently  invested  $19  million in our operating partnership and $8 million in
the  joint venture, which acquired its first hotel, the Hampton Inn Chelsea, New
York,  New  York,  on  August  29,  2003.

     We  are  taxed  as  a  REIT  under Sections 856 through 860 of the Internal
Revenue  Code  of 1986, as amended, or the "Code." REITs are subject to a number
of  organizational  and  operational  requirements, including a requirement that
they  currently  distribute  at least 90% of their taxable income (excluding net
capital  gains).  See  "Federal  Income Tax Consequences of Our Status as REIT."

     The  following  chart shows the structure of our company as of December 31,
2003:



                                        3


                               [GRAPHIC  OMITTED]



(1)  Our  public  shareholders  own  12,614,712  common  shares.
(2)  CNL  owns  190,266  Series  A  Convertible Preferred Units in our operating
     partnership,  which are currently exchangeable for 2,816,460 common limited
     partnership units of our operating partnership, or 2,816,460 common shares.
(3)  Represents  the  general  partner  interest  in  our operating partnership.
(4)  Our  officers  and  trustees  own in the aggregate 3,068,549 common limited
     partnership units of our operating partnership, which are redeemable for an
     equal  number  of  common  shares.
(5)  Third  party  investors  in  our  operating  partnership own 731,174 common
     limited  partnership  units,  which  are  redeemable for an equal number of
     common  shares.
(6)  CNL's  interest  in  our joint venture is exchangeable for 1,192,141 common
     limited  partnership  units in our operating partnership or the same number
     of  common  shares.
(7)  The  lessee  is  HHM Leasehold Interests, Inc., a TRS in which HHMLP owns a
     99%  equity  interest  and  our  operating  partnership  owns  a  1% equity
     interest.


                                        4

                                  RISK FACTORS

     Before  you  invest  in  our  securities, you should carefully consider the
following  risks,  together  with  the  other  information  included  in  this
prospectus,  any  prospectus  supplement  and  the  information  incorporated by
reference.  If  any  of  the  following  risks  actually  occur,  our  business,
financial  condition  or  results  of  operations  may suffer.  As a result, the
trading  price  of our securities could decline, and you may lose all or part of
your  investment.

     An  investment  in our securities involves significant risks, including the
risk  of  losing your entire investment. In evaluating our business, prospective
investors  should  carefully  consider the following risk factors in addition to
the  other  information  contained  in  this  prospectus.

RISKS  RELATING  TO  OUR  BUSINESS  AND  OPERATIONS

     We  may  be  unable  to  integrate  acquired  hotels into our operations or
otherwise  manage  our  planned growth, which may adversely affect our operating
results.

     We  are  attempting  to  acquire  a substantial number of hotels. If we are
successful in making these acquisitions, we cannot assure you that we (or HHMLP)
will be able to adapt our management, administrative, accounting and operational
systems  and  arrangements,  or  hire and retain sufficient operational staff to
integrate  these  investments  into  our  portfolio  and  manage  any  future
acquisitions of additional assets without operating disruptions or unanticipated
costs.  Acquisition  of hotels would generate additional operating expenses that
we would be required to pay. As we acquire additional hotels, we will be subject
to  the  operational  risks  associated  with owning new lodging properties. Our
failure  to  integrate  successfully  any future acquisitions into our portfolio
could  have a material adverse effect on our results of operations and financial
condition  and  our ability to pay dividends to shareholders or other payment in
respect  of  securities  issued  by  us.

ACQUISITION  OF  HOTELS  WITH  LIMITED OPERATING HISTORY MAY NOT ACHIEVE DESIRED
RESULTS.

     We  seek  to  acquire  a  substantial  number  of  new hotels.  Many of our
acquisitions  are  likely  to  be  newly  developed  hotels.  Newly-developed or
newly-renovated  hotels  do  not have the operating history that would allow our
management  to  make  pricing  decisions  in  acquiring  these  hotels  based on
historical performance.  The purchase prices of these hotels are typically based
upon  management's  expectations  as  to  the  operating results of such hotels,
subjecting  us  to  risks that such hotels may not achieve anticipated operating
results  or  may not achieve these results within anticipated time frames.  As a
result,  we  may  not  be able to generate enough cash flow from these hotels to
make debt payments or pay operating expenses.  In addition, room revenues may be
less than that required to provide us with our anticipated return on investment.
In either case, the amounts available for distribution to our shareholders could
be  reduced.

OUR  ACQUISITIONS  MAY  NOT  ACHIEVE  EXPECTED  PERFORMANCE,  WHICH MAY HARM OUR
FINANCIAL  CONDITION  AND  OPERATING  RESULTS.

     We  anticipate  that  acquisitions  will  largely  be financed with the net
proceeds  of securities offerings and through externally generated funds such as
borrowings  under  credit  facilities  and  other  secured  and  unsecured  debt
financing.  Acquisitions  entail  risks that investments will fail to perform in
accordance  with  expectations  and  that  estimates of the cost of improvements
necessary  to  acquire  and  market properties will prove inaccurate, as well as
general  investment  risks  associated  with  any  new  real  estate investment.
Because  we  must  distribute at least 90% of our taxable income to maintain our
qualification  as  a  REIT,  our  ability  to rely upon income or cash flow from
operations  to  finance  our  growth and acquisition activities will be limited.
Accordingly,  were  we  unable  to  obtain  funds from borrowings or the capital
markets  to  finance  our growth and acquisition activities, our ability to grow
could  be curtailed, amounts available for distribution to shareholders could be
adversely  affected  and  we  could  be  required  to  reduce  distributions.


                                        5

WE  OWN  A LIMITED NUMBER OF HOTELS AND SIGNIFICANT ADVERSE CHANGES AT ONE HOTEL
MAY  IMPACT  OUR  LESSEES'  ABILITY  TO  PAY  RENT  AND  OUR  ABILITY  TO  MAKE
DISTRIBUTIONS  TO  SHAREHOLDERS.

     As  of February 2004, we owned only 22 hotels.  Significant adverse changes
in  the  operations of any one hotel could have a material adverse effect on our
lessees'  ability to make rent payments and, accordingly, on our ability to make
expected  distributions  to  our  shareholders.

WE  FOCUS  ON  ACQUIRING  HOTELS  OPERATING  UNDER A LIMITED NUMBER OF FRANCHISE
BRANDS,  WHICH  CREATES  GREATER  RISK AS THE INVESTMENTS ARE MORE CONCENTRATED.

     We  intend  to  place  particular  emphasis  in our acquisition strategy on
hotels similar to our current hotels.  We invest in hotels operating under a few
select  franchises  and  therefore  will  be  subject  to  risks  inherent  in
concentrating  investments  in a particular franchise brand, which could have an
adverse  effect  on our lease revenues and amounts available for distribution to
shareholders.  These  risks  include,  among  others, the risk of a reduction in
hotel  revenues  following any adverse publicity related to a specific franchise
brand.

MANY OF OUR HOTELS ARE LOCATED IN PENNSYLVANIA, WHICH MAY INCREASE THE EFFECT OF
ANY  LOCAL  ECONOMIC  CONDITIONS.

     Eleven  of  our  22  hotels are located in Pennsylvania.  Some of our other
hotels  are  clustered  in metropolitan areas, such as metropolitan New York and
Atlanta.  As  a  result,  localized  adverse  events  or  conditions, such as an
economic  recession around these hotels, could have a significant adverse effect
on  our  operations, and ultimately on the amounts available for distribution to
shareholders.

WE  FACE  RISKS  ASSOCIATED  WITH  THE  USE OF DEBT, INCLUDING REFINANCING RISK.

     At  September  30,  2003, we had debt outstanding of $61.0 million.  We may
borrow  additional  amounts from the same or other lenders in the future, or may
issue  corporate  debt securities in public or private offerings.  Some of these
additional borrowings may be secured by our hotels.  Our strategy is to maintain
target  debt  levels  of  approximately  60%  of the total purchase price of our
hotels  both  on  an  individual and aggregate basis, and our Board of Trustees'
policy  is to limit indebtedness to no more than 67% of the total purchase price
of  all  our hotels on an aggregate basis.  However our declaration of trust (as
amended  and  restated, our "Declaration of Trust") does not limit the amount of
indebtedness  we  may  incur.  We cannot assure you that we will be able to meet
our debt service obligations and, to the extent that we cannot, we risk the loss
of  some  or all of our hotels to foreclosure.  There is also a risk that we may
not be able to refinance existing debt or that the terms of any refinancing will
not  be  as  favorable as the terms of the existing debt.  If principal payments
due  at  maturity  cannot  be  refinanced, extended or repaid with proceeds from
other  sources, such as new equity capital or sales of properties, our cash flow
may  not  be  sufficient  to  repay  all maturing debt in years when significant
"balloon"  payments  come  due.

WE  DO  NOT OPERATE OUR HOTELS AND, AS A RESULT, WE DO NOT HAVE COMPLETE CONTROL
OVER  IMPLEMENTATION  OF  OUR  STRATEGIC  DECISIONS.

     In  order  for  us  to  satisfy certain REIT qualification rules, we cannot
directly  operate  any of our hotels.  Instead, we must lease our hotels.  Eight
of  our  hotels  are  leased  to  an  independent  management company, HHMLP, as
required  by the REIT qualification rules in effect prior to 2001.  In addition,
twelve  other  hotels  are managed by HHMLP under management agreements with our
wholly-owned  TRS  who  leases those hotels from us.  HHMLP makes and implements
strategic  business decisions with respect to our hotels, such as decisions with
respect  to the repositioning of a franchise or food and beverage operations and
other similar decisions.  Decisions made by HHMLP or any other hotel operator to
whom  we  may  lease our hotels may not be in the best interests of a particular
hotel  or of our company.  Accordingly, we cannot assure you that our lessees or
HHMLP  will  operate  our  hotels  in  a  manner  that is in our best interests.

DEPENDENCE  ON  OUR  LESSEES  FOR RENT MAY IMPACT DISTRIBUTIONS TO SHAREHOLDERS.

     We rely on our lessees to make rent payments in order to make distributions
to  shareholders.  Obligations  under  the  percentage  leases,  including  the
obligation  to make rent payments, are unsecured.  HHMLP, the lessee of


                                        6

eight of our hotels, incurred a net loss of $671,000 for the year ended December
31,  2002,  a net loss of $1,104,000 for the year ended December 31, 2001, and a
net  loss  of  $147,000  for  the  year ended December 31, 2000, and HHMLP had a
partners' deficit of $1,890,000 as of September 30, 2003. Reductions in revenues
from  our  hotels  or  in  the net operating income of our lessees may adversely
affect  the  ability  of  our  lessees  to make these rent payments and thus our
ability  to  make  anticipated  distributions  to  our  shareholders.

WE  DEPEND  ON  KEY  PERSONNEL.

     We  depend  on  the services of our existing senior management to carry out
our  business and investment strategies.  As we expand, we will continue to need
to  attract  and  retain qualified additional senior management.  We do not have
employment  contracts  with  any  of our senior management and they may cease to
provide  services to us at any time.  The loss of the services of any of our key
management personnel, or our inability to recruit and retain qualified personnel
in  the  future,  could  have  an  adverse  effect on our business and financial
results.

WE FACE INCREASING COMPETITION FOR THE ACQUISITION OF HOTEL PROPERTIES AND OTHER
ASSETS, WHICH MAY IMPEDE OUR ABILITY TO MAKE FUTURE ACQUISITIONS OR MAY INCREASE
THE  COST  OF  THESE  ACQUISITIONS.

     We  face  competition for investment opportunities in mid-scale hotels from
entities organized for purposes substantially similar to our objectives, as well
as  other  purchasers  of  hotels.  We compete for such investment opportunities
with  entities  that  have substantially greater financial resources than we do,
including access to capital or better relationships with franchisors, sellers or
lenders.  Our  competitors may generally be able to accept more risk than we can
manage  prudently  and may be able to borrow the funds needed to acquire hotels.
Competition may generally reduce the number of suitable investment opportunities
offered  to  us  and increase the bargaining power of property owners seeking to
sell.

RISKS  RELATING  TO  CONFLICTS  OF  INTEREST

DUE  TO CONFLICTS OF INTEREST, MANY OF OUR EXISTING AGREEMENTS MAY NOT HAVE BEEN
NEGOTIATED  ON  AN  ARM'S-LENGTH  BASIS  AND  MAY  NOT  BE IN OUR BEST INTEREST.

     Some  of our officers and trustees have ownership interests in HHMLP and in
entities  with  which  we  have  entered  into  transactions,  including  hotel
acquisitions  and  dispositions and certain financings.  Consequently, the terms
of  our agreements with those entities, including hotel contribution or purchase
agreements,  percentage leases, the Administrative Services Agreement between us
and  HHMLP pursuant to which HHMLP provides certain administrative services, the
Option  Agreement between the operating partnership and some of the trustees and
officers  and  our  property  management agreements with HHMLP may not have been
negotiated  on  an arm's-length basis and may not be in the best interest of all
our  shareholders.

CONFLICTS  OF  INTEREST  WITH OTHER ENTITIES MAY RESULT IN DECISIONS THAT DO NOT
REFLECT  OUR  BEST  INTERESTS.

     The  following  officers and trustees own collectively approximately 81% of
HHMLP:  Hasu  P.  Shah, Jay H. Shah, Neil H.  Shah, David L. Desfor and Kiran P.
Patel.  The following officers and trustees serve as officers of HHMLP: David L.
Desfor,  Kiran  P.  Patel  and  K.D.  Patel.  Conflicts of interest may arise in
respect  of  the  ongoing leasing, acquisition, disposition and operation of our
hotels  including,  but not limited to, the percentage leases and enforcement of
the contribution and purchase agreements, the Administrative Services Agreement,
the  Option  Agreement  and  our  property  management  agreements  with  HHMLP.
Consequently,  the interests of shareholders may not be fully represented in all
decisions  made  or  actions  taken  by  our  officers  and  trustees.

CONFLICTS  OF  INTEREST RELATING TO SALES OR REFINANCING OF HOTELS ACQUIRED FROM
SOME OF OUR TRUSTEES AND OFFICERS MAY LEAD TO DECISIONS THAT ARE NOT IN OUR BEST
INTEREST.

     Some  of  our  trustees  and officers have unrealized gains associated with
their  interests  in the hotels we have acquired from them and, as a result, any
sale  of  the  these  hotels  or  refinancing  or prepayment of principal on the
indebtedness  assumed  by  us  in  purchasing these hotels may cause adverse tax
consequences to such of our trustees


                                        7

and  officers.  Therefore,  our interests and the interests of these individuals
may  be  different  in  connection  with the disposition or refinancing of these
hotels.

COMPETING  HOTELS  OWNED  OR  ACQUIRED  BY SOME OF OUR TRUSTEES AND OFFICERS MAY
HINDER  THESE  INDIVIDUALS  FROM  SPENDING  ADEQUATE  TIME  ON  OUR  BUSINESS.

     Some of our trustees and officers own hotels and may develop or acquire new
hotels,  subject  to  certain  limitations.  Such  ownership,  development  or
acquisition  activities  may materially affect the amount of time these officers
and  trustees  devote to our affairs.  Some of our trustees and officers operate
hotels  that are not owned by us, which may materially affect the amount of time
that  they  devote to managing our hotels.  Pursuant to the Option Agreement, as
amended,  we  have an option to acquire any hotels developed by our officers and
trustees.

NEED  FOR CERTAIN CONSENTS FROM THE LIMITED PARTNERS MAY NOT RESULT IN DECISIONS
ADVANTAGEOUS  TO  SHAREHOLDERS.

     Under  our  operating  partnership's  amended  and  restated  partnership
agreement,  the  holders  of  at  least  two-thirds  of  the  interests  in  the
partnership must approve a sale of all or substantially all of the assets of the
partnership  or  a  merger  or  consolidation  of  the partnership.  Some of our
officers  and  trustees  will own an approximately 17% interest in the operating
partnership on a fully-diluted basis.  Their large ownership percentage may make
it  less  likely  that a merger or sale of our company that would be in the best
interests  of  our  shareholders  will  be  approved.

RISKS  RELATING  TO  OUR  CORPORATE  STRUCTURE

A  MAJOR  SHAREHOLDER  HAS  SIGNIFICANT  INFLUENCE  OVER  OUR  AFFAIRS.

     CNL,  through  its  ownership  of Series A Preferred Units of our operating
partnership  owns  approximately  14.9%  of our common shares on a fully-diluted
basis.  In addition, CNL would be able to acquire an additional 5% of our common
shares  on  a  fully-diluted  basis  upon  exchange of its interest in our joint
venture.  CNL  may  also  purchase additional Series A Preferred Units and joint
venture  interests.  Pursuant to the terms of the Series A Convertible Preferred
Units  owned  by  CNL,  and  the  Series  A Preferred Shares into which they are
exchangeable,  it has a number of special rights, including, but not limited to:

     -    certain  preemptive rights with respect to any issuance by us prior to
          April  2006  of  common  shares;
     -    certain  rights  to  elect  members  of  our  Board  of  Trustees; and
     -    certain  approval  rights  including  with  respect  to:
          -    mergers;
          -    the  sale  of  all  or  substantially  all  of  our  assets;
          -    the  issuance  of  equity  securities;
          -    the  payment  of  dividends  while  in  arrears  with  respect to
               dividends  relating  to  CNL's  securities;
          -    certain  amendments  to  our  Declaration  of  Trust;
          -    filing  for  bankruptcy;  and
          -    terminating  our  REIT  status.

     In  addition,  for  so  long  as  the  holders  of the Series A Convertible
Preferred  Units  hold in the aggregate that number of Series A Preferred Units,
common  shares  and  any  other  class  of  our  equity  that  represent  on  an
as-converted  or  as-exchanged  basis  at  least  five percent of the issued and
outstanding  common  shares on a fully diluted basis, a majority of the Series A
Preferred Units must approve a sale of all or substantially all of the assets of
the  operating  partnership  or  a  merger  or  consolidation  of  the operating
partnership.  CNL  therefore  holds  veto  power  over  such  extraordinary
transactions,  which could result in the disapproval of a transaction that would
be  beneficial  to  our  shareholders.

     In  addition,  pursuant  to  the terms of our joint venture with CNL, until
April  21,  2004,  we  must  present  all  of  our  proposed acquisitions to the
investment  committee  of  the  joint  venture,  and  we  may  only acquire such
acquisition  directly  if  the investment committee or CNL fails to approve that
acquisition  for  the joint venture. This arrangement may make it more difficult
for  us  to  acquire  suitable  hotels  other  than  through  the joint venture.


                                        8

     As  a  result  of  its ownership of our securities and the rights described
above,  CNL  may  have  significant  influence  over  our  affairs.  This  could
potentially  be  disadvantageous to other shareholders' interests, which may not
be  aligned  with the interests of CNL. For a more detailed description of CNL's
rights,  see  the  sections  entitled  "CNL  Strategic  Alliance."

OUR  OWNERSHIP  LIMITATION  MAY  RESTRICT  BUSINESS  COMBINATION  OPPORTUNITIES.

     To  qualify  as  a REIT under the Code, no more than 50% of our outstanding
shares  of  beneficial interest may be owned, directly or indirectly, by five or
fewer  individuals  during  the last half of each taxable year.  To preserve our
REIT  qualification,  our  Declaration  of  Trust  generally prohibits direct or
indirect  ownership of more than 9.9% of the number of outstanding shares of any
class of our securities, including the common shares, by any person.  Generally,
common  shares owned by affiliated owners will be aggregated for purposes of the
ownership  limitation.  The  ownership  limitation  could  have  the  effect  of
delaying,  deferring  or  preventing a change in control or other transaction in
which  holders  of common shares might receive a premium for their common shares
over  the then prevailing market price or which such holders might believe to be
otherwise  in  their  best  interests.

THE  DECLARATION  OF TRUST CONTAINS A PROVISION THAT CREATES STAGGERED TERMS FOR
OUR  BOARD  OF  TRUSTEES.

     Our  Board of Trustees is divided into two classes.  The terms of the first
and  second  classes  expire  in  2004 and 2005, respectively.  Trustees of each
class  are elected for two-year terms upon the expiration of their current terms
and  each  year  one class of trustees will be elected by the shareholders.  The
staggered terms of trustees may delay, defer or prevent a tender offer, a change
in  control  of us or other transaction, even though such a transaction might be
in  the  best  interest  of  the  shareholders.

MARYLAND  BUSINESS  COMBINATION  LAW MAY DISCOURAGE A THIRD PARTY FROM ACQUIRING
US.

     Under  the  Maryland  General  Corporation  Law,  as  amended  (MGCL),  as
applicable  to  real  estate  investment trusts, certain "business combinations"
(including  certain  issuances  of  equity  securities)  between a Maryland real
estate investment trust and any person who beneficially owns ten percent or more
of  the voting power of the trust's shares or an affiliate thereof or any person
who  is  an  affiliate or associate of the trust and was the beneficial owner of
ten percent or more of the voting shares of the trust within the two year period
immediately  prior  to the date in question, are prohibited for five years after
the  most recent date on which this shareholder acquired at least ten percent of
the  voting  power  of  the  trust's  shares.  Thereafter,  any  such  business
combination  must  be  approved  by two super-majority shareholder votes unless,
among  other conditions, the trust's common shareholders receive a minimum price
(as  defined  in the MGCL) for their shares and the consideration is received in
cash  or  in  the same form as previously paid by the interested shareholder for
its common shares.  These provisions could delay, defer or prevent a transaction
or  change  of  control of our company in which our shareholders might otherwise
receive  a  premium  for  their shares above then-current market prices or might
otherwise  deem to be in their best interests.  CNL and some of our trustees and
officers  may  control  a  sufficient  percentage of the voting power to block a
proposal  respecting  a business combination under these provisions.  As part of
the  transaction  with  CNL,  we  exempted  CNL  from  the  application of these
provisions,  which  could  make us more vulnerable to an unsolicited acquisition
attempt  by  CNL  that  would  not  be  advantageous  for  all  shareholders.

THE BOARD OF TRUSTEES MAY CHANGE OUR INVESTMENT AND OPERATIONAL POLICIES WITHOUT
A  VOTE  OF  THE  COMMON  SHAREHOLDERS.

     Our  major  policies,  including our policies with respect to acquisitions,
financing, growth, operations, debt limitation and distributions, are determined
by  our  Board  of  Trustees.  The  Trustees may amend or revise these and other
policies  from  time to time without a vote of the holders of the common shares.

OUR  BOARD  OF  TRUSTEES  MAY ISSUE ADDITIONAL SHARES THAT MAY CAUSE DILUTION OR
PREVENT  A  TRANSACTION  THAT  IS  IN  THE  BEST  INTERESTS OF OUR SHAREHOLDERS.

     Our  Declaration  of  Trust  authorizes  the  Board  of  Trustees,  without
shareholder  approval,  to:


                                        9

     -    amend  the  Declaration of Trust to increase or decrease the aggregate
          number  of  shares  of  beneficial interest or the number of shares of
          beneficial  interest of any class that we have the authority to issue,

     -    cause  us to issue additional authorized but unissued common shares or
          preferred  shares  and

     -    classify  or reclassify any unissued common or preferred shares and to
          set  the  preferences,  rights  and  other terms of such classified or
          reclassified  shares,  including  the  issuance  of  additional common
          shares or preferred shares that have preference rights over the common
          shares  with  respect  to  dividends,  liquidation,  voting  and other
          matters.

     Any  one  of  these events could cause dilution to our common shareholders,
delay,  defer or prevent a transaction or a change in control that might involve
a  premium  price for the common shares or otherwise not be in the best interest
of  holders  of  common  shares.

FUTURE  OFFERINGS OF DEBT SECURITIES, WHICH WOULD BE SENIOR TO OUR COMMON SHARES
UPON  LIQUIDATION,  OR  EQUITY  SECURITIES,  WHICH  WOULD  DILUTE  OUR  EXISTING
SHAREHOLDERS AND MAY BE SENIOR TO OUR COMMON SHARES FOR THE PURPOSES OF DIVIDEND
DISTRIBUTIONS,  MAY  ADVERSELY  AFFECT  THE  MARKET  PRICE OF OUR COMMON SHARES.

     In  the  future, we may attempt to increase our capital resources by making
additional  offerings of debt or equity securities, including medium-term notes,
senior  or  subordinated  notes and classes of preferred or common shares.  Upon
liquidation,  holders  of our debt securities and shares of preferred shares and
lenders  with  respect  to  other  borrowings will receive a distribution of our
available  assets  prior to the holders of our common shares.  Additional equity
offerings  may  dilute  the  holdings of our existing shareholders or reduce the
market  price  of  our common shares, or both.  Our preferred shares, if issued,
could have a preference on liquidating distributions or a preference on dividend
payments  that  could  limit  our ability to make a dividend distribution to the
holders  of  our common shares.  Because our decision to issue securities in any
future  offering  will  depend on market conditions and other factors beyond our
control,  we  cannot  predict  or  estimate  the amount, timing or nature of our
future  offerings.  Thus, our shareholders bear the risk of our future offerings
reducing the market price of our common shares and diluting their stock holdings
in  us.

POSSIBLE  ADVERSE  EFFECT OF SHARES AVAILABLE FOR FUTURE SALE ON PRICE OF COMMON
SHARES.

     At  any  time, CNL may elect to exchange its Series A Convertible Preferred
Units for up to 2,816,460 common shares and exchange its interest in their joint
venture with us for up to 1,192,141 additional common shares.  To the extent CNL
funds additional capital to us or our joint venture, the number of common shares
issuable  upon  such  exchange  will increase.  Furthermore, there are 3,799,723
outstanding  limited  partnership units in our operating partnership (other than
the  Series  A  Convertible  Preferred Units) which currently are redeemable for
common shares.  Upon the exchange of the Series A Convertible Preferred Units or
the  redemption  of common limited partnership units, the common shares received
therefor  may  be  sold  in  the  public  market  pursuant to shelf registration
statements  that  we  are  obligated  to  file  on behalf of CNL and the limited
partners  of  our operating partnership, or pursuant to any available exemptions
from  registration.  Sales  of  a  substantial  number  of common shares, or the
perception that such sales could occur, could adversely affect prevailing market
prices  of  the  common  shares.

THERE  ARE  NO  ASSURANCES  OF  OUR ABILITY TO MAKE DISTRIBUTIONS IN THE FUTURE.

     We  intend  to  pay  quarterly  dividends  and to make distributions to our
shareholders in amounts such that all or substantially all of our taxable income
in  each  year,  subject  to  certain adjustments, is distributed.  However, our
ability to pay dividends may be adversely affected by the risk factors described
in  this  prospectus.  All  distributions  will be made at the discretion of our
Board  of  Trustees  and will depend upon our earnings, our financial condition,
maintenance  of  our  REIT  status  and such other factors as our board may deem
relevant  from  time  to  time.  There  are  no assurances of our ability to pay
dividends  in  the future.  In addition, some of our distributions may include a
return  of  capital.


                                       10

AN  INCREASE  IN  MARKET INTEREST RATES MAY HAVE AN ADVERSE EFFECT ON THE MARKET
PRICE  OF  OUR  SECURITIES.

     One  of  the factors that investors may consider in deciding whether to buy
or sell our securities is our dividend rate as a percentage of our share or unit
price,  relative  to  market interest rates.  If market interest rates increase,
prospective  investors  may  desire  a  higher  dividend or interest rate on our
securities  or  seek securities paying higher dividends or interest.  The market
price  of  our  common shares likely will be based primarily on the earnings and
return  that  we  derive  from  our  investments  and income with respect to our
properties  and  our  related  distributions  to  shareholders, and not from the
market  value  or  underlying  appraised  value of the properties or investments
themselves.  As  a  result,  interest  rate  fluctuations  and  capital  market
conditions  can  affect the market price of our common shares.  For instance, if
interest  rates  rise without an increase in our dividend rate, the market price
of  our  common  shares could decrease because potential investors may require a
higher  dividend  yield on our common shares as market rates on interest-bearing
securities,  such  as  bonds,  rise.  In  addition,  rising interest rates would
result  in  increased  interest  expense  on  our  variable  rate  debt, thereby
adversely  affecting  cash  flow and our ability to service our indebtedness and
pay  dividends.

RISKS  RELATED  TO  OUR  TAX  STATUS

IF WE FAIL TO QUALIFY AS A REIT, OUR DIVIDENDS WILL NOT BE DEDUCTIBLE TO US, AND
OUR  INCOME  WILL  BE  SUBJECT  TO  TAXATION.

     We  have  operated  and intend to continue to operate so as to qualify as a
REIT  for  federal  income  tax purposes.  Our continued qualification as a REIT
will  depend  on our continuing ability to meet various requirements concerning,
among  other  things,  the  ownership  of  our  outstanding shares of beneficial
interest, the nature of our assets, the sources of our income, and the amount of
our  distributions to our shareholders.  If we were to fail to qualify as a REIT
in  any  taxable  year, we would not be allowed a deduction for distributions to
our shareholders in computing our taxable income and would be subject to federal
income  tax  (including  any  applicable alternative minimum tax) on our taxable
income at regular corporate rates.  Unless entitled to relief under certain Code
provisions,  we also would be disqualified from treatment as a REIT for the four
taxable  years  following  the  year  during which qualification was lost.  As a
result,  amounts available for distribution to shareholders would be reduced for
each of the years involved.  Although we currently intend to operate in a manner
designed  to  qualify  as  a  REIT, it is possible that future economic, market,
legal,  tax  or other considerations may cause the trustees, with the consent of
holders  of  two-thirds  of the outstanding shares, to revoke the REIT election.

FAILURE  TO  MAKE  REQUIRED  DISTRIBUTIONS  WOULD  SUBJECT  US  TO  TAX.

     In  order  to  qualify  as  a  REIT,  each  year  we must distribute to our
shareholders at least 90% of our REIT taxable income, other than any net capital
gain.  To  the  extent  that  we  satisfy  the  distribution  requirement,  but
distribute  less  than 100% of our taxable income, we will be subject to federal
corporate  income tax on our undistributed income.  In addition, we will incur a
4% nondeductible excise tax on the amount, if any, by which our distributions in
any  year  are  less  than  the  sum  of:

     -    85%  of  our  REIT  ordinary  income  for  that  year;
     -    95%  of  our  REIT  capital  gain  net  income  for  that  year;  and
     -    100%  of  our  undistributed  taxable  income  from  prior  years.

     We  have  paid  out,  and  intend to continue to pay out, our income to our
shareholders in a manner intended to satisfy the distribution requirement and to
avoid  corporate income tax and the 4% nondeductible excise tax.  Differences in
timing  between  the  recognition of income and the related cash receipts or the
effect  of  required debt amortization payments could require us to borrow money
or  sell  assets  to  pay  out  enough  of  our  taxable  income  to satisfy the
distribution  requirement  and  to  avoid  corporate  income  tax  and  the  4%
nondeductible  excise  tax  in a particular year.  In the past we have borrowed,
and  in  the  future we may borrow, to pay distributions to our shareholders and
the  limited  partners of our operating partnership.  Such borrowings subject us
to  risks  from  borrowing  as  described  herein.


                                       11

RECENT CHANGES IN TAXATION OF CORPORATE DIVIDENDS MAY ADVERSELY AFFECT THE VALUE
OF  OUR  COMMON  SHARES.

     The  Jobs  and  Growth  Tax  Relief  Reconciliation  Act of 2003, which was
enacted  into  law on May 28, 2003, among other things, generally reduces to 15%
the  maximum  marginal rate of tax payable by domestic noncorporate taxpayers on
dividends  received  from  a  regular  C  corporation.  This  reduced  tax rate,
however,  will not apply to dividends paid to domestic noncorporate taxpayers by
a  REIT on its stock, except for certain limited amounts.  Although the earnings
of  a  REIT  that  are  distributed  to its shareholders still generally will be
subject  to  less  federal  income  taxation  than  earnings  of  a  non-REIT  C
corporation  that  are  distributed  to  its shareholders net of corporate-level
income tax, this legislation could cause domestic noncorporate investors to view
the  stock of regular C corporations as more attractive relative to the stock of
a  REIT than was the case prior to the enactment of the legislation, because the
dividends  from  regular  C corporations will generally be taxed at a lower rate
while  dividends  from  REITs  will  generally  be taxed at the same rate as the
individual's  other ordinary income.  We cannot predict what effect, if any, the
enactment  of  this  legislation  may have on the value of the stock of REITs in
general  or  on  our  common  shares  in particular, either in terms of price or
relative  to  other  investments.

RISKS  RELATED  TO  THE  HOTEL  INDUSTRY

THE  VALUE  OF  OUR  HOTELS  DEPENDS  ON  CONDITIONS  BEYOND  OUR  CONTROL.

     Our hotels are subject to varying degrees of risk generally incident to the
ownership of hotels.  The underlying value of our hotels, our income and ability
to  make distributions to our shareholders are dependent upon the ability of our
lessees  to  operate  the  hotels in a manner sufficient to maintain or increase
revenues  in  excess  of  operating  expenses to enable our lessees to make rent
payments.  Hotel  revenues  may  be  adversely  affected  by  adverse changes in
national  economic conditions, adverse changes in local market conditions due to
changes  in  general  or  local  economic  conditions  and  neighborhood
characteristics, competition from other hotels, changes in interest rates and in
the  availability,  cost  and  terms of mortgage funds, the impact of present or
future  environmental  legislation  and  compliance with environmental laws, the
ongoing need for capital improvements, particularly in older structures, changes
in  real  estate  tax  rates  and  other  operating expenses, adverse changes in
governmental rules and fiscal policies, civil unrest, acts of terrorism, acts of
God, including earthquakes, hurricanes and other natural disasters, acts of war,
adverse  changes  in zoning laws, and other factors that are beyond our control.
In  particular,  general and local economic conditions may be adversely affected
by  the  recent  terrorist  incidents  in  New  York  and  Washington, D.C.  Our
management  is  unable  to  determine  the  long-term  impact,  if any, of these
incidents  or of any acts of war or terrorism in the United States or worldwide,
on  the  U.S.  economy, on us or our hotels or on the market price of our common
shares.

OUR  HOTELS  ARE  SUBJECT  TO  GENERAL HOTEL INDUSTRY OPERATING RISKS, WHICH MAY
IMPACT  OUR  LESSEES'  ABILITY  TO MAKE RENT PAYMENTS AND ON OUR ABILITY TO MAKE
DISTRIBUTIONS  TO  SHAREHOLDERS.

     Our hotels are subject to all operating risks common to the hotel industry.
The  hotel  industry has experienced volatility in the past, as have our hotels,
and there can be no assurance that such volatility will not occur in the future.
These  risks  include,  among  other  things,  competition  from  other  hotels;
over-building  in the hotel industry that could adversely affect hotel revenues;
increases  in  operating costs due to inflation and other factors, which may not
be  offset  by increased room rates; reduction in business and commercial travel
and  tourism; strikes and other labor disturbances of hotel employees; increases
in  energy  costs  and  other expenses of travel; adverse effects of general and
local  economic  conditions;  and  adverse  political conditions.  These factors
could reduce revenues of the hotels and adversely affect the lessees' ability to
make  rent  payments,  and  therefore,  our ability to make distributions to our
shareholders.

COMPETITION  FOR  GUESTS  IS  HIGHLY  COMPETITIVE.

     The  hotel  industry  is highly competitive.  Our hotels compete with other
existing  and  new  hotels in their geographic markets.  Many of our competitors
have  substantially  greater  marketing  and financial resources than we do.  If
their marketing strategies are effective, our lessees may be unable to make rent
payments  and  we  may  be  unable  to  make  distributions to our shareholders.


                                       12

OUR  INVESTMENTS  ARE  CONCENTRATED  IN  A SINGLE SEGMENT OF THE HOTEL INDUSTRY.

     Our current business strategy is to own and acquire hotels primarily in the
mid-scale  segment  of  the hotel industry.  We are subject to risks inherent in
concentrating  investments in a single industry and in a specific market segment
within  that  industry.  The  adverse effect on rent under the percentage leases
and amounts available for distribution to shareholders resulting from a downturn
in the hotel industry in general or the mid-scale segment in particular could be
more  pronounced than if we had diversified our investments outside of the hotel
industry  or  in  additional  hotel  market  segments.

THE  HOTEL  INDUSTRY  IS  SEASONAL  IN  NATURE.

     The  hotel  industry  is seasonal in nature.  Generally, hotel revenues are
greater  in the second and third quarters than in the first and fourth quarters.
Our hotels' operations historically reflect this trend.  We believe that we will
be  able  to  make  distributions necessary to maintain REIT status through cash
flow  from operations; but if we are unable to do so, we may not be able to make
the necessary distributions or we may have to generate cash by a sale of assets,
increasing  indebtedness  or  sales  of  securities  to  make the distributions.

RISKS  OF  OPERATING HOTELS UNDER FRANCHISE LICENSES, WHICH MAY BE TERMINATED OR
NOT  RENEWED,  MAY  IMPACT  OUR  LESSEES'  ABILITY TO MAKE RENT PAYMENTS AND OUR
ABILITY  TO  MAKE  DISTRIBUTIONS  TO  SHAREHOLDERS.

     The  continuation  of  the  franchise  licenses  is  subject  to  specified
operating  standards  and other terms and conditions.  All of the franchisors of
our  hotels  periodically  inspect  our  hotels  to  confirm  adherence to their
operating  standards.  The  failure  of our partnership, our lessees or HHMLP to
maintain  such  standards  or to adhere to such other terms and conditions could
result  in  the loss or cancellation of the applicable franchise license.  It is
possible  that  a  franchisor  could  condition  the continuation of a franchise
license  on  the  completion of capital improvements that the trustees determine
are  too  expensive  or  otherwise not economically feasible in light of general
economic  conditions,  the operating results or prospects of the affected hotel.
In that event, the trustees may elect to allow the franchise license to lapse or
be  terminated.

     There  can be no assurance that a franchisor will renew a franchise license
at  each  option period. If a franchisor terminates a franchise license, we, our
partnership,  our  lessees  and  HHMLP  may  be  unable  to  obtain  a  suitable
replacement  franchise,  or  to  successfully operate the hotel independent of a
franchise license. The loss of a franchise license could have a material adverse
effect  upon the operations or the underlying value of the related hotel because
of  the  loss  of associated name recognition, marketing support and centralized
reservation  systems  provided by the franchisor. Although the percentage leases
require  our  lessees  to  maintain  the  franchise licenses for each hotel, our
lessees'  loss of a franchise license for one or more of the hotels could have a
material  adverse effect on our partnership's revenues and our amounts available
for  distribution  to  shareholders.

OPERATING  COSTS  AND  CAPITAL  EXPENDITURES FOR HOTEL RENOVATION MAY BE GREATER
THAN  ANTICIPATED AND MAY ADVERSELY IMPACT RENT PAYMENTS BY OUR LESSEES' AND OUR
ABILITY  TO  MAKE  DISTRIBUTIONS  TO  SHAREHOLDERS.

     Hotels  generally  have  an  ongoing need for renovations and other capital
improvements,  particularly  in older structures, including periodic replacement
of  furniture,  fixtures  and  equipment.  Under  the  terms  of  our leases and
management  agreements  with  HHMLP,  we  are  obligated  to  pay  the  cost  of
expenditures  for items that are classified as capital items under GAAP that are
necessary  for  the continued operation of our hotels.  If these expenses exceed
our  estimate,  the  additional  cost  could  have  an adverse effect on amounts
available  for distribution to shareholders.  In addition, we may acquire hotels
in  the  future  that  require  significant  renovation.  Renovation  of  hotels
involves  certain  risks,  including  the possibility of environmental problems,
construction  cost  overruns  and  delays,  uncertainties as to market demand or
deterioration  in  market  demand  after  commencement  of  renovation  and  the
emergence  of  unanticipated  competition  from  hotels.

ADJUSTMENTS  TO  THE  PURCHASE  PRICE  TO  OUR  HOTELS  MAY  LEAD TO SUBSTANTIAL
SHAREHOLDER  DILUTION.

     Five  of  the  hotels  currently  owned  by  us  were purchased pursuant to
agreements that provide for post-closing purchase price adjustments based on the
hotel's performance in relation to the purchase price.  In the event


                                       13

that  any  of the purchase prices of these hotels are increased on an adjustment
date  and  the  purchase  price adjustment is paid in common limited partnership
units,  owners  of  the  common  shares  at  such time will experience dilution.

RISKS  RELATED  TO  REAL  ESTATE  INVESTMENT  GENERALLY

ILLIQUIDITY OF REAL ESTATE INVESTMENTS COULD SIGNIFICANTLY IMPEDE OUR ABILITY TO
RESPOND  TO  ADVERSE  CHANGES  IN THE PERFORMANCE OF OUR PROPERTIES AND HARM OUR
FINANCIAL  CONDITION.

     Real  estate  investments are relatively illiquid.  Our ability to vary our
portfolio  in  response  to  changes in operating, economic and other conditions
will  be  limited.  No assurances can be given that the fair market value of any
of  our  hotels  will  not  decrease  in  the  future.

IF  WE  SUFFER LOSSES THAT ARE NOT COVERED BY INSURANCE OR THAT ARE IN EXCESS OF
OUR  INSURANCE COVERAGE LIMITS, WE COULD LOSE INVESTMENT CAPITAL AND ANTICIPATED
PROFITS.

     Each  lease  specifies  comprehensive insurance to be maintained on each of
the  our  hotels,  including liability and fire and extended coverage in amounts
sufficient  to permit the replacement of the hotel in the event of a total loss,
subject  to  applicable deductibles.  Leases for hotels subsequently acquired by
us will contain similar provisions.  However, there are certain types of losses,
generally  of a catastrophic nature, such as earthquakes, floods, hurricanes and
acts  of  terrorism,  that  may  be  uninsurable  or not economically insurable.
Inflation,  changes  in  building  codes  and  ordinances,  environmental
considerations  and  other  factors  also  might  make  it  impracticable to use
insurance  proceeds  to replace the applicable hotel after such applicable hotel
has been damaged or destroyed.  Under such circumstances, the insurance proceeds
received  by  us  might  not  be  adequate to restore our economic position with
respect  to  the  applicable hotel.  If any of these or similar events occur, it
may  reduce  the  return  from  the  attached  property  and  the  value  of our
investment.

REITS  ARE  SUBJECT  TO  PROPERTY  TAXES.

     Each  hotel  is  subject to real and personal property taxes.  The real and
personal  property  taxes on hotel properties in which we invest may increase as
property  tax  rates  change and as the properties are assessed or reassessed by
taxing authorities.  Many state and local governments are facing budget deficits
which  has  led  many  of  them,  and may in the future lead others to, increase
assessments  and/or  taxes.  If  property  taxes  increase,  our ability to make
expected  distributions  to  our  shareholders  could  be  adversely  affected.

ENVIRONMENTAL  MATTERS  COULD  ADVERSELY  AFFECT  OUR  RESULTS.

     Operating  costs  may  be affected by the obligation to pay for the cost of
complying  with existing environmental laws, ordinances and regulations, as well
as  the  cost  of  future  legislation.  Under  various federal, state and local
environmental  laws,  ordinances and regulations, a current or previous owner or
operator  of real property may be liable for the costs of removal or remediation
of hazardous or toxic substances on, under or in such property.  Such laws often
impose  liability  whether  or  not  the  owner  or  operator  knew  of,  or was
responsible  for,  the presence of such hazardous or toxic substances.  The cost
of  complying  with environmental laws could materially adversely affect amounts
available  for  distribution to shareholders.  Phase I environmental assessments
have  been  obtained  on  all  of our hotels.  Nevertheless, it is possible that
these  reports  do  not  reveal  all environmental liabilities or that there are
material  environmental  liabilities  of  which  we  are  unaware.

COSTS  ASSOCIATED  WITH  COMPLYING  WITH THE AMERICANS WITH DISABILITIES ACT MAY
ADVERSELY  AFFECT  OUR  FINANCIAL  CONDITION  AND  OPERATING  RESULTS.

     Under  the  Americans  with  Disabilities  Act  of  1993  (ADA), all public
accommodations  are  required  to  meet  certain federal requirements related to
access  and  use  by  disabled  persons.  While  we  believe that our hotels are
substantially in compliance with these requirements, a determination that we are
not  in  compliance with the ADA could result in imposition of fines or an award
of damages to private litigants.  In addition, changes in governmental rules and
regulations  or  enforcement  policies  affecting  the  use and operation of the
hotels,  including changes to building codes and fire and life-safety codes, may
occur.  If  we  were required to make substantial modifications at


                                       14

the  hotels  to  comply  with the ADA or other changes in governmental rules and
regulations,  our  ability  to  make  expected distributions to our shareholders
could  be  adversely  affected.

                                 USE OF PROCEEDS

     We  will not receive any of the proceeds from the sale of the common shares
offered  by  this  prospectus.





                                       15

                               SELLING SHAREHOLDER

     This  prospectus  relates  to  up  to 2,816,460 common shares of beneficial
interest  which  may  be  offered  from  time  to time by CNL.  We may issue the
2,816,460  common shares covered by this prospectus to CNL to the extent that it
exchanges  Series  A  preferred  units  of  limited  partnership interest in our
operating  partnership  for  such common shares in accordance with the operating
partnership's  partnership  agreement.  CNL  currently  owns  190,266  Series  A
preferred  units  of  limited partnership interest in our operating partnership,
each  of  which  is  exchangeable  at any time, at the option of the holder, for
(among  other  securities) approximately 14.8 common shares, based on an initial
exchange  price  of  $6.7555 per common share.  The exchange price is subject to
anti-dilution adjustments upon the occurrence of certain events, including share
splits  and  combinations,  reclassifications,  reorganizations,  mergers,
consolidations  or  asset  sales,  or  the  sale  of  common shares or operating
partnership  units  below 85% of the then effective conversion or exchange price
(initially  $5.74).

     CNL  also  owns  an  interest  in  our joint venture with CNL, HT/CNL Metro
Hotels, that is exchangeable for up to 1,192,141 common shares.  This prospectus
does not relate to any common shares issuable to CNL upon exchange of this joint
venture  interest.

     At  February  18,  2004,  there  were 12,614,712 common shares outstanding.
Assuming  full  exchange of all CNL's Series A preferred units and joint venture
interest,  they  would own approximately 24.1% of the outstanding common shares,
or  7.2%  if  all  of the common shares offered hereby are sold. Because CNL may
exchange  all,  some or none of their Series A preferred units, we cannot give a
definitive estimate as to the number of common shares or other equity securities
that  will  be  held  by  CNL  after  this  offering.

     We  are  obligated  to  file  the  registration  statement  of  which  this
prospectus is a part pursuant to that certain Registration Rights Agreement with
CNL  dated  April  21,  2003.

                 DISTRIBUTIONS AND PRICE RANGE OF COMMON SHARES

     Since  our  initial  public  offering  in  January of 1999, we have made 18
consecutive quarterly distributions to holders of the common shares of $0.18 per
share,  which  annualizes  to  $0.72 per share.  We have also paid an equivalent
distribution to holders of our common limited partnership units in our operating
partnership  for  the same periods.  While it is the current policy of our Board
of Trustees to maintain our dividend at this level, future distributions will be
authorized  by our Board of Trustees based on a number of factors, including the
amount  of  funds  from  operations, our partnership's financial condition, debt
service  requirements,  capital  expenditure  requirements  for  our hotels, the
annual  distribution requirements under the REIT provisions of the Code and such
other  factors as the trustees deem relevant.  Our ability to make distributions
will  depend  on our receipt of distributions from our operating partnership and
lease  payments  from  our  lessees  with respect to the hotels.  We rely on our
lessees  to  generate  sufficient  cash flow from the operation of the hotels to
meet  their  rent  obligations  under  the  percentage  leases.

     The  Series A Convertible Preferred Units rank senior to all common limited
partnership  units  in  our operating partnership, including our general partner
units,  and  all  common  shares.  Distributions  on  the  Series  A Convertible
Preferred  Units  accrue at a rate of 10.5% of the original issue price. Because
we  derive  our  revenue  from distributions from our operating partnership, the
distribution  rights  of  the  common  shares are effectively subordinate to the
distribution  rights  of  the  Series  A  Convertible  Preferred Units. See "CNL
Strategic  Alliance."

     The  hotel business is seasonal in nature and, therefore, revenues from the
hotels  in  the  first and fourth quarters are traditionally lower than those in
the  second  and  third  quarters  and  our  lease revenue may be lower in these
quarters.  We  expect to use excess cash flow from the second and third quarters
to  fund  distribution  shortfalls  in  the first and fourth quarters. We cannot
assure  you  that we will be able to continue to make quarterly distributions at
the  current  rate.

     Our  common  shares  trade  on the American Stock Exchange under the symbol
"HT."  As  of February 18, 2004, there were 12,614,712 common shares outstanding
held  by  approximately  150  persons of record and 2,000


                                       16

beneficial  owners.  The following table sets forth the high and low sale prices
of  our  common  shares as reported by the American Stock Exchange and dividends
declared  on  our  common  shares  for  each  of  the  quarters  indicated.





                                       17



                                                                CASH
                                                 PRICE RANGE  DIVIDEND
                                               --------------  ------

                                                                PER
                                                HIGH    LOW    SHARE
                                               ------  ------  ------
                                                      
YEAR ENDED DECEMBER 31, 2004
     First quarter (through February 25, 2004  $11.75  $ 9.90  $    -

                                                                PER
                                                HIGH    LOW    SHARE
                                               ------  ------  ------
YEAR ENDED DECEMBER 31, 2003
     Fourth quarter                            $10.10  $ 8.41  $ 0.18
     Third quarter                             $ 9.10  $ 7.93  $ 0.18
     Second quarter                            $ 8.25  $ 6.54  $ 0.18
     First quarter                             $ 7.30  $ 6.31  $ 0.18

                                                                PER
                                                HIGH    LOW    SHARE
                                               ------  ------  ------
YEAR ENDED DECEMBER 31, 2002
     Fourth quarter                            $ 6.99  $ 5.40  $ 0.18
     Third quarter                             $ 6.55  $ 5.75  $ 0.18
     Second quarter                            $ 6.70  $ 6.00  $ 0.18
     First quarter                             $ 6.70  $ 5.51  $ 0.18

                                                                PER
                                                HIGH    LOW    SHARE
                                               ------  ------  ------
YEAR ENDED DECEMBER 31, 2001
     Fourth quarter                            $ 6.25  $ 5.10  $ 0.18
     Third quarter                             $ 6.90  $ 4.25  $ 0.18
     Second quarter                            $ 6.09  $ 4.80  $ 0.18
     First quarter                             $ 6.13  $ 5.50  $ 0.18





                                       18


                  DESCRIPTION OF SHARES OF BENEFICIAL INTEREST

     The  following  summary  of  the terms of our shares of beneficial interest
does  not purport to be complete and is subject to and qualified in its entirety
by  reference  to  our  Declaration  of  Trust  and  Bylaws, copies of which are
exhibits  to the Registration Statement of which this Prospectus is a part.  See
"Where  You  Can  Find  More  Information."

GENERAL

     Our  Declaration of Trust provides that we may issue up to 50,000,000 Class
A  common  shares  of beneficial interest, $0.01 par value per share, 50,000,000
Class  B  common  shares  of beneficial interest, $0.01 par value per share, and
10,000,000  preferred  shares of beneficial interest, $0.01 par value per share.
As  of  February  18,  2004,  12,614,712  Class  A common shares were issued and
outstanding  and  no  Class  B  common  or  preferred  shares  were  issued  and
outstanding.  Effective  as  of January 26, 2004, the Class B common shares were
automatically  converted into Class A common shares, any differences between the
Class A common shares and Class B common shares disappeared and we now have only
one  class  of  common  shares.  As  permitted  by  the  Maryland  REIT Law, our
Declaration  of  Trust  contains  a  provision permitting our Board of Trustees,
without  any  action  by  our shareholders, to amend the Declaration of Trust to
increase  or  decrease  the aggregate number of shares of beneficial interest or
the  number of shares of any class of shares of beneficial interest that we have
authority  to  issue.

     Our  Declaration  of  Trust  provides  that  none  of  our  shareholders is
personally liable for any of our obligations solely as a result of his status as
a  shareholder.  Our  Bylaws  further  provide  that  we  shall  indemnify  each
shareholder  against any claim or liability to which the shareholder, subject to
certain  limitations, may become subject by reason of his being or having been a
shareholder  or  former  shareholder  and  that  we  shall pay or reimburse each
shareholder  or  former  shareholder for all legal and other expenses reasonably
incurred  by  him  in  connection  with  any  claim  or  liability.

COMMON  SHARES

     As  a  holders  of  common  shares,  you  will  receive  distributions,  or
dividends,  on the shares you own if the Board of Trustees authorizes a dividend
out  of our legally available assets.  Your right to receive those dividends may
be affected, however, by the preferential rights of any other class or series of
shares  of  beneficial  interest  and the provisions of our declaration of trust
regarding  restrictions  on  the transfer of shares of beneficial interest.  For
example,  you  may  not  receive  dividends  if  no  funds  are  available  for
distribution  after  we  pay dividends to holders of preferred shares.  You will
also  be  entitled  to  receive  dividends  based  on  our  assets available for
distribution  to  common  shareholders  if we liquidate, dissolve or wind-up our
operations.  The amount you, as a shareholder, would receive in the distribution
would  be  determined  by  the  amount  of  your  beneficial  ownership of us in
comparison  with  other  beneficial  owners.  Assets  will  be  available  for
distribution  to shareholders only after we have paid all of our known debts and
liabilities  and paid the holders of any preferred shares we may issue which are
outstanding  at  that  time.

     Subject  to  the preferential rights of the Series A Preferred Shares or of
any  other  shares or series of beneficial interest and to the provisions of our
Declaration  of  Trust  regarding  the  restriction on the transfer of shares of
beneficial  interest, holders of common shares are entitled to receive dividends
on  shares  if, when and as authorized and declared by our Board of Trustees out
of  assets legally available therefor and to share ratably in our assets legally
available  for distribution to our shareholders in the event of our liquidation,
dissolution  or  winding-up  after payment of, or adequate provision for, all of
our  known  debts  and  liabilities.

     Holders  of  common  shares have no preference, sinking fund, redemption or
appraisal  rights  and  have  no  preemptive  rights to subscribe for any of our
securities.  Subject to the provisions of our Declaration of Trust regarding the
restriction on transfer of shares of beneficial interest, the common shares have
equal  voting,  dividend,  distribution,  liquidation  and  other  rights.


                                       19

Voting  Rights  of  Common  Shares

     Subject  to  the  provisions  of  the  Declaration  of  Trust regarding the
restriction  of  the transfer of shares of beneficial interest, each outstanding
common  share entitles the holder to one vote on all matters submitted to a vote
of  shareholders,  including  the  election of trustees.  There is no cumulative
voting  in  the election of trustees, which means that the holders of a majority
of the outstanding common shares, voting as a single class, can elect all of the
trustees  then standing for election and the holders of the remaining shares are
not  able  to  elect  any  trustees.

     Under  the  Maryland  REIT  Law, a Maryland REIT generally cannot amend its
declaration  of  trust  or  merge  unless  approved  by  the affirmative vote of
shareholders  holding  at least two-thirds of the shares entitled to vote on the
matter unless a lesser percentage (but not less than a majority of all the votes
entitled  to  be  cast  on the matter) is set forth in the REIT's declaration of
trust  subject to the terms of any other class or series of shares of beneficial
interest.  Our  Declaration  of Trust provides for approval by a majority of all
the  votes  entitled  to  be  cast on the matter in all situations permitting or
requiring action by the shareholders except with respect to: (a) our intentional
disqualification  as  a REIT or revocation of our election to be taxed as a REIT
(which  requires  the  affirmative  vote  of  two-thirds of the number of common
shares  entitled  to  vote on such matter at a meeting of our shareholders); (b)
the  election of trustees (which requires a plurality of all the votes cast at a
meeting  of  our  shareholders at which a quorum is present); (c) the removal of
trustees  (which  requires  the affirmative vote of the holders of two-thirds of
our  outstanding  voting  shares);  (d)  the  amendment  or  repeal  of  certain
designated  sections  of the Declaration of Trust (which require the affirmative
vote  of two-thirds of the outstanding shares entitled to vote on such matters);
(e)  the  amendment  of the Declaration of Trust by shareholders (which requires
the  affirmative  vote of a majority of votes entitled to be cast on the matter,
except  under  certain  circumstances specified in the Declaration of Trust that
require  the affirmative vote of two-thirds of all the votes entitled to be cast
on  the matter); and (f) our termination (which requires the affirmative vote of
two-thirds  of  all  the  votes  entitled  to  be cast on the matter). Under the
Maryland  REIT  Law,  a  declaration  of  trust  may  permit  the  trustees by a
two-thirds  vote  to amend the declaration of trust from time to time to qualify
as  a  REIT under the Code or the Maryland REIT Law without the affirmative vote
or  written  consent  of the shareholders. Our Declaration of Trust permits such
action  by  a  majority  vote of the trustees. As permitted by the Maryland REIT
Law,  our  Declaration  of  Trust  contains a provision permitting our trustees,
without  any  action  by  our shareholders, to amend the Declaration of Trust to
increase  or  decrease  the aggregate number of shares of beneficial interest or
the  number of shares of any class of shares of beneficial interest that we have
authority  to  issue.

PREFERRED  SHARES

     The  Declaration  of Trust authorizes our Board of Trustees to classify any
unissued  preferred  shares  and  to  reclassify  any  previously classified but
unissued preferred shares of any series from time to time in one or more series,
as  authorized  by  the  Board of Trustees.  Prior to issuance of shares of each
series,  the  Board  of  Trustees  is  required by the Maryland REIT Law and our
Declaration  of  Trust to set for each such series, subject to the provisions of
our  Declaration  of  Trust  regarding  the restriction on transfer of shares of
beneficial  interest,  the  terms,  the preferences, conversion or other rights,
voting powers, restrictions, limitations as to dividends or other distributions,
qualifications  and  terms  or  conditions  of  redemption for each such series.
Thus,  our  Board  of  Trustees could authorize the issuance of preferred shares
with  terms and conditions which could have the effect of delaying, deferring or
preventing  a  transaction  or  a  change  in control in us that might involve a
premium  price  for  holders  of  common  shares  or  otherwise be in their best
interest.

THE  SERIES  A  PREFERRED  SHARES

     On  April  21,  2003,  in connection with the CNL transaction, our Board of
Trustees  classified  and  designated  350,000  preferred  shares  of beneficial
interest as Series A Preferred Shares of beneficial interest, par value $.01 per
share.  The  Series  A  Convertible Preferred Units held by CNL in our operating
partnership  are exchangeable for our Series A Preferred Shares on a one for one
basis.  As  of the date hereof, no preferred shares are outstanding.  The Series
A  Preferred  Shares are senior to the common shares as to payment of dividends,
distributions  of  assets  upon  liquidation, dissolution or winding-up, whether
voluntary  or  involuntary,  or  otherwise.

     The  terms  of  the  Series A Preferred Shares are described in more detail
under  the  heading  "CNL  Strategic Alliance-Investment in Series A Convertible
Preferred  Units  of  Our  Operating  Partnership."


                                       20

CLASSIFICATION  OR  RECLASSIFICATION  OF  COMMON  SHARES  OR  PREFERRED  SHARES

     Our  Declaration  of  Trust authorizes the Board of Trustees to classify or
reclassify  any  unissued  common  shares  or  preferred shares into one or more
classes  or  series  of shares of beneficial interest by setting or changing the
preferences,  conversion  or  other  rights,  voting  powers,  restrictions,
limitations  as  to  dividends  or  distributions,  qualifications  or  terms or
conditions  of  redemption  of  such new class or series of shares of beneficial
interest.

RESTRICTIONS  ON  OWNERSHIP  AND  TRANSFER

     Our  Declaration  of  Trust, subject to certain exceptions described below,
provides  that  no  person  may  own,  or  be  deemed  to  own  by virtue of the
attribution  provisions  of  the  Code,  more  than  9.9%  of  (i) the number of
outstanding  common  shares  of any class or series of common shares or (ii) the
number  of  outstanding  preferred  shares  of  any class or series of preferred
shares.  For  this purpose, a person includes a "group" and a "beneficial owner"
as  those  terms  are used for purposes of Section 13(d)(3) of the Exchange Act.
Any  transfer  of common or preferred shares that would (i) result in any person
owning,  directly  or  indirectly,  common  or preferred shares in excess of the
ownership limitation, (ii) result in the common and preferred shares being owned
by  fewer  than  100  persons  (determined  without  reference  to  any rules of
attribution),  (iii)  result  in  us  being "closely held" within the meaning of
Section 856(h) of the Code, or (iv) cause us to own, actually or constructively,
10%  or  more of the ownership interests in a tenant of our or our partnership's
real  property,  within the meaning of Section 856(d)(2)(B) of the Code, will be
null and void, and the intended transferee will acquire no rights in such common
or  preferred  shares.

     Subject  to  certain  exceptions  described  below,  any  common  shares or
preferred  shares the purported transfer of which would (i) result in any person
owning,  directly  or indirectly, common shares or preferred shares in excess of
the  ownership limitation, (ii) result in the common shares and preferred shares
being owned by fewer than 100 persons (determined without reference to any rules
of  attribution), (iii) result in our being "closely held" within the meaning of
Section 856(h) of the Code, or (iv) cause us to own, actually or constructively,
10%  or  more of the ownership interests in a tenant of our or our partnership's
real  property,  within the meaning of Section 856(d)(2)(B) of the Code, will be
designated  as  "shares-in-trust"  and  transferred  automatically  to  a  trust
effective  on  the  day  before  the purported transfer of such common shares or
preferred  shares.  The record holder of the common or preferred shares that are
designated  as  shares-in-trust will be required to submit such number of common
shares  or preferred shares to us for registration in the name of the trust. The
trustee  will  be  designated  by  us,  but  will not be affiliated with us. The
beneficiary  of  a  trust  will be one or more charitable organizations that are
named  by  us.

     Shares-in-trust  will  remain  issued  and  outstanding  common  shares  or
preferred  shares  and will be entitled to the same rights and privileges as all
other  shares  of the same class or series. The trust will receive all dividends
and  distributions  on  the  shares-in-trust  and  will  hold  such dividends or
distributions  in  trust for the benefit of the beneficiary. The trust will vote
all  shares-in-trust.  The  trust  will  designate a permitted transferee of the
shares-in-trust,  provided  that  the  permitted  transferee  (i) purchases such
shares-in-trust  for  valuable  consideration  and  (ii)  acquires  such
shares-in-trust  without  such  acquisition  resulting  in a transfer to another
trust.

     The  prohibited  owner  with respect to shares-in-trust will be required to
repay to the record holder the amount of any dividends or distributions received
by  the  prohibited  owner  (i) that are attributable to any shares-in-trust and
(ii)  the  record date of which was on or after the date that such shares became
shares-in-trust.  The  prohibited  owner  generally will receive from the record
holder  the lesser of (i) the price per share such prohibited owner paid for the
common  shares  or preferred shares that were designated as shares-in-trust (or,
in  the  case of a gift or devise, the market price (as defined below) per share
on the date of such transfer) or (ii) the price per share received by the record
holder  from  the  sale  of  such  shares- in-trust. Any amounts received by the
record  holder  in excess of the amounts to be paid to the prohibited owner will
be  distributed  to  the  beneficiary.

     The  shares-in-trust will be deemed to have been offered for sale to us, or
its  designee,  at  a  price  per share equal to the lesser of (i) the price per
share in the transaction that created such shares-in-trust (or, in the case of a
gift or devise, the market price per share on the date of such transfer) or (ii)
the  market  price  per share on the date that we, or our designee, accepts such
offer. We will have the right to accept such offer for a period of 90 days after
the  later  of  (i)  the  date  of the purported transfer which resulted in such
shares-in-trust  or  (ii)  the  date  we determine in good faith that a transfer
resulting  in  such  shares-in-trust  occurred.


                                       21

     "Market  price"  on any date shall mean the average of the last quoted sale
price  as  reported  by  the  American  Stock  Exchange for the five consecutive
trading  days  (as  defined  below)  ending  on  such  date.

     Any  person  who acquires or attempts to acquire common or preferred shares
in  violation  of  the foregoing restrictions, or any person who owned common or
preferred  shares that were transferred to a trust, will be required (i) to give
immediately  written  notice  to us of such event and (ii) to provide to us such
other information as we may request in order to determine the effect, if any, of
such  transfer  on  our  status  as  a  REIT.

     All  persons  who  own, directly or indirectly, more than 5% (or such lower
percentages  as  required  pursuant  to  regulations  under  the  Code)  of  the
outstanding  common  and preferred shares must, within 30 days after December 31
of  each  year,  provide to us a written statement or affidavit stating the name
and address of such direct or indirect owner, the number of common and preferred
shares  owned  directly  or indirectly, and a description of how such shares are
held.  In addition, each direct or indirect shareholder shall provide to us such
additional  information  as  we may request in order to determine the effect, if
any, of such ownership on our status as a REIT and to ensure compliance with the
ownership  limitation.

     The  ownership  limitation  generally  does not apply to the acquisition of
common  or  preferred  shares  by  an  underwriter that participates in a public
offering  of  such  shares. In addition, the trustees, upon receipt of advice of
counsel  or  other  evidence  satisfactory  to  the  trustees, in their sole and
absolute discretion, may, in their sole and absolute discretion, exempt a person
from  the  ownership  limitation  under  certain  circumstances.  The  foregoing
restrictions  continue  to  apply until (i) the trustees determine that it is no
longer  in  our best interests to attempt to qualify, or to continue to qualify,
as  a  REIT and (ii) there is an affirmative vote of two-thirds of the number of
common  and  preferred  shares  entitled  to vote on such matter at a regular or
special  meeting  of  our  shareholders.

     We  granted  limited  waivers  of  these  ownership limitations as follows:

     -    a  limited  waiver  to  CNL  allows CNL to own 100% of the outstanding
          Series  A  Preferred  Shares  and  up to 60% of the outstanding common
          shares  on  a  fully  diluted  basis, subject to CNL's compliance with
          certain representations and warranties (see "CNL Strategic Alliance");

     -    a  limited  waiver  to RREEF America L.L.C., Deutche Asset Management,
          Inc.,  and  their  related  mutual  funds  and  accounts, specifically
          including  Scudder  RREEF  Real  Estate  Fund Inc., Scudder RREEF Real
          Estate  Fund II Inc. and Scudder RREEF Securities Trust (collectively,
          the  "Scudder  RREEF  Group")  to  own  15%  of the outstanding common
          shares,  subject  to their compliance with certain representations and
          warranties, including that no single person will own more than 9.9% of
          the  outstanding  common  shares;  and

     -    a  limited  waiver  to  K.G.  Redding  &  Associates,  and its managed
          accounts to own 15% of the outstanding common shares, subject to their
          compliance  with certain representations and warranties including that
          no  single  person  will  own more than 9.9% of the outstanding common
          shares.

     All  certificates  representing  common  or  preferred shares bear a legend
referring  to  the  restrictions  described  above.

     This  ownership  limitation could have the effect of delaying, deferring or
preventing a change in control or other transaction in which holders of some, or
a  majority, of shares of common shares might receive a premium for their shares
of  common  shares  over  the then prevailing market price or which such holders
might  believe  to  be  otherwise  in  their  best  interest.

OTHER  MATTERS

     Our  transfer  agent  and  registrar  for  our  common  shares  is Wachovia
Securities,  N.A.,  Charlotte,  North  Carolina.


                                       22

            CERTAIN PROVISIONS OF MARYLAND LAW AND OF OUR DECLARATION
                               OF TRUST AND BYLAWS

CLASSIFICATION  OF  THE  BOARD  OF  TRUSTEES

     Our  Bylaws  provide  that the number of our trustees may be established by
the Board of Trustees but may not be fewer than three nor more than nine.  As of
August  31, 2003, we have seven trustees.  The trustees may increase or decrease
the  number of trustees by a vote of at least 80% of the members of the Board of
Trustees,  provided  that  the  number  of trustees shall never be less than the
number required by Maryland law and that the tenure of office of a trustee shall
not  be affected by any decrease in the number of trustees.  Any vacancy will be
filled, including a vacancy created by an increase in the number of trustees, at
any  regular  meeting  or  at  any special meeting called for that purpose, by a
majority  of  the remaining trustees or, if no trustees remain, by a majority of
our  shareholders.

     Pursuant to our Declaration of Trust, the Board of Trustees is divided into
two  classes  of  trustees. Trustees of each class are chosen for two-year terms
and  each  year  one  class  of trustees will be elected by the shareholders. We
believe  that  classification  of  the  Board  of  Trustees  helps to assure the
continuity  and  stability of our business strategies and policies as determined
by  the trustees. Holders of common shares have no right to cumulative voting in
the  election of trustees. Consequently, at each annual meeting of shareholders,
the  holders  of  a  majority  of the common shares are able to elect all of the
successors  of  the  class  of  trustees  whose  terms  expire  at that meeting.

     The  classified  board  provision  could  have  the  effect  of  making the
replacement  of  incumbent  trustees  more  time  consuming  and  difficult. The
staggered  terms  of  trustees  may delay, defer or prevent a tender offer or an
attempt  to  change  control  in  us  or  other transaction that might involve a
premium price for holders of common shares that might be in the best interest of
the  shareholders.

REMOVAL  OF  TRUSTEES

     The  Declaration  of  Trust  provides that a trustee may be removed with or
without  cause  upon  the  affirmative  vote of at least two-thirds of the votes
entitled  to  be cast in the election of trustees.  This provision, when coupled
with  the  provision  in  the  Bylaws  authorizing the Board of Trustees to fill
vacant  trusteeships,  precludes  shareholders from removing incumbent trustees,
except upon a substantial affirmative vote, and filling the vacancies created by
such  removal  with  their  own  nominees.

BUSINESS  COMBINATIONS

     Under Maryland law, certain business combinations between us and any person
who  beneficially  owns, directly or indirectly, 10% or more of the voting power
of  our  shares,  an  affiliate of ours who, at any time within the previous two
years  was the beneficial owner of 10% or more of the voting power of our shares
(who  the  statute  terms  an  "interested  shareholder"), or an affiliate of an
interested shareholder, are prohibited for five years after the most recent date
on  which  they  became interested shareholders.  The business combinations that
are  subject to this law include mergers, consolidations, share exchanges or, in
certain  circumstances,  asset  transfers  or  issuances or reclassifications of
equity  securities.  After the five-year period has elapsed, a proposed business
combination  must  be  recommended  by the Board of Trustees and approved by the
affirmative  vote  of  at  least:

     -    80%  of  our  outstanding  voting  shares;  and
     -    two-thirds  of the outstanding voting shares, excluding shares held by
          the  interested  shareholder,

unless,  among  other  conditions,  the  shareholders  receive  a fair price, as
defined  by  Maryland law, for their shares and the consideration is received in
cash  or  in  the same form as previously paid by the interested shareholder for
its  shares.

     These  provisions  do not apply, however, to business combinations that the
Board  of  Trustees  approves  or  exempts  before  the time that the interested
shareholder  becomes  an  interested  shareholder.


                                       23

     Pursuant  to  a resolution of our Board of Trustees, CNL's ownership of our
securities  are  exempt  from  the  Maryland  Business  Combination  Statute.

CONTROL  SHARE  ACQUISITIONS

     Maryland  law  provides  that "control shares" acquired in a "control share
acquisition"  have  no  voting rights unless approved by a vote of two-thirds of
our  outstanding  voting  shares,  excluding  shares owned by the acquiror or by
officers  or  directors  who are employees of ours.  "Control shares" are voting
shares  which,  if  aggregated  with all other shares previously acquired by the
acquiring  person,  or  in  respect  of  which  the  acquiring person is able to
exercise  or direct the exercise of voting power, other than by revocable proxy,
would entitle the acquiring person to exercise voting power in electing trustees
within  one  of  the  following  ranges  of  voting  power:

     -    one-tenth  or  more  but  less  than  one-third;
     -    one-third  or  more  but  less  than  a  majority;  or
     -    a  majority  of  all  voting  power.

     Control  shares do not include shares the acquiring person is then entitled
to  vote  as  a  result  of  having previously obtained shareholder approval.  A
"control  share acquisition" means the acquisition of control shares, subject to
certain  exceptions.

     A person who has made or proposes to make a control share acquisition, upon
satisfaction  of  certain  conditions, including an undertaking to pay expenses,
may compel our Board of Trustees to call a special meeting of shareholders to be
held within 50 days of demand to consider the voting rights of the shares. If no
request  for a meeting is made, we may present the question at any shareholders'
meeting.

     If  voting  rights  are not approved at the shareholders' meeting or if the
acquiring  person does not deliver the statement required by Maryland law, then,
subject  to  certain conditions and limitations, we may redeem any or all of the
control  shares,  except  those  for  which  voting  rights have previously been
approved, for fair value. Fair value is determined without regard to the absence
of  voting  rights for the control shares and as of the date of the last control
share  acquisition  or of any meeting of shareholders at which the voting rights
of  the  shares  were  considered and not approved. If voting rights for control
shares  are  approved  at  a  shareholders' meeting, and as a result thereof the
acquiror  may  then  vote  a  majority of the shares entitled to vote, all other
shareholders  may  exercise  appraisal  rights. The fair value of the shares for
purposes  of  these  appraisal rights may not be less than the highest price per
share  paid  by the acquiror in the control share acquisition. The control share
acquisition statute does not apply to shares acquired in a merger, consolidation
or  share  exchange  if  we are a party to the transaction, nor does it apply to
acquisitions  approved  or  exempted  by  our  Declaration  of  Trust or Bylaws.

     Our Bylaws contain a provision exempting from the control share acquisition
act  any  and  all  acquisitions  by  any  person of our shares. There can be no
assurance  that  this provision will not be amended or eliminated at any time in
the  future.

AMENDMENT

     Our  Declaration of Trust provides that it may be amended with the approval
of  at  least  a majority of all of the votes entitled to be cast on the matter,
but  that certain provisions of the Declaration of Trust regarding (i) our Board
of  Trustees,  including  the  provisions  regarding  independent  trustee
requirements,  (ii)  the  restrictions  on transfer of the common shares and the
preferred  shares,  (iii) amendments to the Declaration of Trust by the trustees
and  our  shareholders  and  (iv)  our  termination may not be amended, altered,
changed  or  repealed  without  the  approval  of two-thirds of all of the votes
entitled  to  be  cast  on these matters.  In addition, the Declaration of Trust
provides  that  it  may be amended by the Board of Trustees, without shareholder
approval  to  (a)  increase  or  decrease  the  aggregate  number  of  shares of
beneficial  interest or the number of shares of any class of beneficial interest
that the Trust has authority to issue or (b) qualify as a REIT under the Code or
under  the  Maryland REIT law.  Our Bylaws may be amended or altered exclusively
by  the  Board  of  Trustees.


                                       24

LIMITATION  OF  LIABILITY  AND  INDEMNIFICATION

     Our  Declaration of Trust limits the liability of our trustees and officers
for  money  damages,  except  for  liability  resulting  from:

     -    actual  receipt of an improper benefit or profit in money, property or
          services;  or
     -    a  final  judgment  based  upon  a  finding  of  active and deliberate
          dishonesty by the trustees or others that was material to the cause of
          action  adjudicated.

     Our  Declaration of Trust authorizes us, to the maximum extent permitted by
Maryland  law, to indemnify, and to pay or reimburse reasonable expenses to, any
of  our  present  or  former trustees or officers or any individual who, while a
trustee  or  officer  and  at  our request, serves or has served another entity,
employee  benefit  plan or any other enterprise as a trustee, director, officer,
partner or otherwise.  The indemnification covers any claim or liability against
the person.  Our Bylaws and Maryland law require us to indemnify each trustee or
officer  who  has been successful, on the merits or otherwise, in the defense of
any  proceeding  to  which  he  or  she  is made a party by reason of his or her
service  to  us.

     Maryland  law  permits a Maryland real estate investment trust to indemnify
its  present and former trustees and officers against liabilities and reasonable
expenses  actually  incurred  by  them  in  any  proceeding  unless:

     -    the  act  or  omission  of  the trustee or officer was material to the
          matter  giving  rise  to  the  proceeding;  and
     -    was  committed  in  bad  faith;  or
     -    was  the  result  of  active  and  deliberate  dishonesty;  or
     -    in  a criminal proceeding, the trustee or officer had reasonable cause
          to  believe  that  the  act  or  omission  was  unlawful.

     However,  a  Maryland real estate investment trust may not indemnify for an
adverse  judgment  in  a derivative action.  Our Bylaws and Maryland law require
us,  as  a  condition to advancing expenses in certain circumstances, to obtain:

     -    a  written  affirmation  by  the trustee or officer of his or her good
          faith  belief that he or she has met the standard of conduct necessary
          for  indemnification;  and
     -    a  written  undertaking to repay the amount reimbursed if the standard
          of  conduct  was  not  met.

CERTAIN  PROVISIONS  OF  MARYLAND  LAW

     Maryland  law also provides that Maryland real estate investment trust that
are  subject  to  the  Exchange Act and have at least three outside trustees can
elect  by  resolution  of  the Board of Trustees to be subject to some corporate
governance  provisions  that may be inconsistent with the real estate investment
trust declaration of trust and bylaws.  Under the applicable statute, a board of
trustees  may  classify  itself  without  the  vote of shareholders.  A board of
trustees  classified  in  that  manner  cannot  be  altered  by amendment to the
declaration of trust of the real estate investment trust.  Further, the board of
trustees  may,  by  electing  into  applicable  statutory  provisions  and
notwithstanding  the  declaration  of  trust  or  bylaws:

     -    provide that a special meeting of shareholders, will be called only at
          the  request  of shareholders, entitled to cast at least a majority of
          the  votes  entitled  to  be  cast  at  the  meeting,
     -    reserve  for  itself  the  right  to  fix  the  number  of  trustees,
     -    provide  that a trustee may be removed only by the vote of the holders
          of  two-thirds  of  the  shares  entitled  to  vote,  and
     -    retain  for  itself  sole  authority  to fill vacancies created by the
          death,  removal  or  resignation  of  a  trustee.

     In  addition, a trustee elected to fill a vacancy under this provision will
serve  for  the  balance  of the unexpired term instead of until the next annual
meeting  of shareholders.  A board of trustees may implement all or any of these
provisions  without  amending  the  declaration  of  trust or bylaws and without
shareholder  approval.  A  real estate investment trust may be prohibited by its
declaration of trust or by resolution of its board of trustees from electing any
of  the  provisions  of the statute.  We are is not prohibited from implementing
any  or  all  of the statute.  If


                                       25

implemented,  these provisions could discourage offers to acquire the our shares
and  could  increase  the  difficulty  of  completing  an  offer.

POSSIBLE  ANTI-TAKEOVER  EFFECT OF CERTAIN PROVISIONS OF MARYLAND LAW AND OF OUR
DECLARATION  OF  TRUST  AND  BYLAWS

     The business combination provisions and, if the applicable exemption in the
Bylaws  is  rescinded, the control share acquisition provisions of the MGCL, the
provisions  of  our  Declaration  of  Trust  on  classification  of the Board of
Trustees, the removal of trustees and the restrictions on the transfer of shares
of  beneficial  interest  and  the advance notice provisions of the Bylaws could
have  the  effect of delaying, deferring or preventing a transaction or a change
in  the  control  that  might  involve a premium price for holders of the common
shares  or  otherwise  be  in  their  best  interest.

                             CNL STRATEGIC ALLIANCE

     The  following  summary of the terms of the CNL strategic alliance does not
purport  to  be  complete  and  is  subject  to and qualified in its entirety by
reference  to  the  described agreements, which are exhibits to the Registration
Statement  of  which  this  Prospectus  is a part.  See "Where You Can Find More
Information."

     In April of 2003, we entered into a strategic alliance with CNL Hospitality
Partners,  L.P.,  a  subsidiary  of  CNL  Hospitality Properties, Inc.  CNL is a
public  company,  which  has  been  one  of the most active investors in lodging
properties  over  the  past several years.  Since its inception in 1996, CNL has
invested  over  $2.2  billion  in  hotel  properties.  The  strategic  alliance
positions  us  as  one  of  CNL's  preferred partners for investing in mid-scale
hotels.  Our  agreement  with CNL provides that it will invest up to $25 million
in  our  operating  partnership  and  up  to $40 million in a newly formed hotel
acquisition  joint  venture.  CNL  has  currently  invested  $19  million in our
operating  partnership  and  $8 million in the joint venture, which acquired its
first  hotel,  the  Hampton Inn Chelsea, New York, New York, on August 29, 2003.

INVESTMENT  IN SERIES A CONVERTIBLE PREFERRED UNITS OF OUR OPERATING PARTNERSHIP

     On  April  21 and May 21, 2003, CNL purchased a total of 150,000 units of a
newly  created  series of convertible preferred limited partnership units of our
operating  partnership  (the "Series A Convertible Preferred Units") in exchange
for CNL's payment of $15,000,000 in cash, net of certain transaction costs.  CNL
purchased  an  additional  40,266 Series A Convertible Preferred Units on August
29,  2003, for approximately $4 million.  CNL may be obligated to purchase up to
an  additional  59,734  Series A Convertible Preferred Units, also at a per unit
price  of  $100.00.

DIVIDENDS

     Each  Series  A  Convertible  Preferred  Unit  provides  for  a  quarterly
cumulative  preferred  dividend  of  10.5%  per annum on the $100 original issue
price  per share and a liquidation value of $100 per share, plus any accrued but
unpaid  dividends.

PREEMPTIVE  RIGHTS

     Each  Series  A Convertible Preferred Unit has preemptive rights during the
three-year  period  after  their  date  of  issuance  in the event our operating
partnership  sells  additional partnership units, provided that no such approval
shall  be  required  in  the  event  of  (i)  an  issuance  of  common operating
partnership  units in exchange for a contribution of properties to the operating
partnership  approved  by  our  Board of Trustees, (b) the issuance of operating
partnership  units  in  connection  with  an  approved  employee  benefit  plan,
including  issuance  of  partnership units to our company in connection with the
issuance of up to 650,000 common shares pursuant to an approved employee benefit
plan,  or  (c)  the  issuance  of  operating partnership units to our company in
connection  with  the  issuance  of  common  shares  pursuant  to  a  dividend
reinvestment  plan.


                                       26

EXCHANGE  AND  CONVERSION

     Each  Series A Convertible Preferred Unit is exchangeable or convertible at
the  option  of  its  holder for either (i) one Series A Preferred Share or (ii)
approximately  14.8 common shares or ordinary operating partnership units, based
on an initial conversion price of $6.7555 per common share or ordinary operating
partnership  unit.  The  initial conversion price represents the volume weighted
average  closing  price  for the common shares for the 20 trading days preceding
April  21,  2003.  The  exchange or conversion price is subject to anti-dilution
adjustments  upon  the  occurrence of certain events, including share splits and
combinations,  reclassifications,  reorganizations,  mergers,  consolidations or
asset  sales,  or the sale of common shares or operating partnership units below
85%  of  the  then  effective  conversion  or  exchange price (initially $5.74).

REDEMPTION

     Upon  a  vote of a majority of the members of our Board of Trustees, we may
redeem  all  or any part of the outstanding Series A Convertible Preferred Units
for  a  per  Unit redemption price equal to the sum of the original issue price,
all  accrued  but  unpaid  dividends and a premium which is initially $10.50 per
unit  and  declines annually on a straight line basis over a ten-year period.  A
Series  A Convertible Preferred Unit holder who has received a redemption notice
will  have  the  opportunity  in  lieu  of redemption to exchange or convert its
Series  A  Convertible  Preferred  Units  into Series A Preferred Shares, common
shares  or  ordinary  operating  partnership  units.

VOTING  RIGHTS

     The  holders of Series A Convertible Preferred Units have the right to vote
as  a  single  class with holders of ordinary operating partnership interests on
all  matters  upon  which  they  are entitled to vote.  The holders of operating
partnership  units  are  entitled  to  a  number of votes equal to the number of
common  shares  for  which  their  units  would  then  be  exchangeable.

APPROVAL  RIGHTS

     We  must  obtain  the approval of the holders of a majority of the Series A
Convertible  Preferred  Units  to  effect  the  following  actions:

     -    any  creation,  or  increase  in  number  of, securities senior to the
          Series  A  Convertible  Preferred  Units;

     -    the  issuance  of  any  class  or  series  of  equity  interest in our
          operating  partnership prior to the first to occur of (i) the issuance
          of  an  aggregate  of  250,000 Series A Convertible Preferred Units in
          accordance  with  the  terms  of  the  CNL  strategic alliance or (ii)
          certain  terminating events defined in the agreement pursuant to which
          CNL  purchased its Series A Convertible Preferred Units; provided that
          no  such approval shall be required in the event of (i) an issuance of
          common  operating  partnership units in exchange for a contribution of
          properties  to  the  operating  partnership  approved  by our Board of
          Trustees,  (b)  the  issuance  of  operating  partnership  units  in
          connection  with an approved employee benefit plan, including issuance
          of partnership units to our company in connection with the issuance of
          up  to  650,000 common shares pursuant to an approved employee benefit
          plan,  or  (c)  the  issuance  of  operating  partnership units to our
          company in connection with the issuance of common shares pursuant to a
          dividend  reinvestment  plan;

     -    during  any  period  when  distributions  with respect to the Series A
          Convertible  Preferred  Units are in arrears, any purchase, redemption
          or  other acquisition for value (or payment into or setting aside as a
          sinking  fund  for  such  purpose)  of any operating partnership units
          junior  to  the  Series  A  Convertible  Preferred  Units;

     -    during  any  period  when  distributions  with respect to the Series A
          Convertible Preferred Units are in arrears, any action that results in
          the  declaration  or  payment  of distributions, direct or indirect on
          account  of  any  junior  units;

     -    any  action  that  results in any amendment, alteration, or repeal (by
          merger  or  consolidation  or  otherwise)  of  any  provisions  of the
          amendment  to  the  operating  partnership  agreement  designating the


                                       27

          Series  A  Convertible  Preferred  Units,  any  provisions  of  our
          Declaration  of  Trust,  as  amended, or our By-laws which eliminates,
          amends  or  affects  any term (adversely or otherwise) of the Series A
          Preferred  Shares  and/  or  the common shares or shares of any series
          ranking  senior  to  the Series A Preferred Shares, including, without
          limitation,  the  redemption,  dividend,  voting,  preemptive,
          anti-dilution  and other powers, rights and preferences of such shares
          or  adversely  affects  any  holder  thereof;

     -    any  action  where  our company or the operating partnership or any of
          our  or  its material subsidiaries files any voluntary, or consents to
          the  filing  of any involuntary, petition for relief under title 11 of
          the  United  States  Code  or  any  successor  statute  or  under  any
          reorganization,  arrangement,  insolvency,  readjustment  of  debt,
          dissolution  or  liquidation  law  with  respect  to  our company, the
          operating  partnership  or  any  of  our  or  its  subsidiaries;

     -    any  action where our company, the operating partnership or any of our
          material  subsidiaries  appoints or consents to, or acquiesces in, the
          appointment  of  a  receiver,  conservator,  trustee  or other similar
          official  charged  with  the  administration,  control,  management,
          operation,  liquidation,  dissolution or valuation of our company, the
          operating  partnership  or any of our or its material subsidiaries, or
          any  of  their  respective  businesses  or  assets;  and

     -    any  agreement  to  do  any  of  the  transactions  set  forth  above.

     We are also required to obtain the approval of the holders of a majority of
the  Series  A  Convertible Preferred Units to effect the following actions, but
only  for so long as the holders of Series A Convertible Preferred Units hold in
the aggregate that number of Series A Convertible Preferred Units, common shares
and  any other class or series of our equity that represents, on an as converted
or  exchanged basis, at least five percent of the common shares then outstanding
on  a fully diluted basis, assuming the conversion or exchange for common shares
of  all  convertible or exchangeable securities of our company and our operating
partnership:

     -    any  action where our company or the operating partnership merges with
          or  into  or  consolidates  with  any  other entity, but excluding any
          merger  effected  exclusively for the purpose of changing the domicile
          of  our  company  or  the  operating  partnership;

     -    any  action where the operating partnership or any of its subsidiaries
          directly  or  indirectly  sells, leases, transfers, conveys or assigns
          (whether  in  a  single transaction or series of related transactions)
          all  or  substantially  all  of  its  assets,  other than transactions
          involving  leases by the operating partnership of its hotel properties
          in  the  ordinary  course  of  its  business;

     -    all transactions involving our company or the operating partnership of
          the  type  referred  in paragraph (a) of Rule 145 under the Securities
          Act of 1933, as amended, and all transactions involving our company or
          the  operating partnership constituting a change-in-control within the
          meaning  of  Rule  14(f) under the Securities Exchange Act of 1934, as
          amended;

     -    any  action where our company, the operating partnership or any of our
          or  its  subsidiaries,  or  HHMLP,  on  the  one  hand, engages in any
          transaction  with  an  affiliate  of  our  company  or  the  operating
          partnership  on  the other hand, provided, however, to the extent such
          transactions  are  of the type which, but for their affiliated nature,
          would  fall  within  the  ordinary  course  of business and day-to-day
          affairs  of  the  operating  partnership,  such  actions  need  not be
          approved on a transaction-by-transaction basis but may be entered into
          pursuant  to annual budgets and purchase plans approved by the holders
          of  the  Series  A  Convertible Preferred Units. For purposes of these
          provisions, "affiliate" has the meaning set forth in Rule 12b-2 of the
          Exchange  Act  and  includes, without limitation, (a) the trustees and
          senior  officers  of  our company, the operating partnership or any of
          our  or  its  subsidiaries,  his  or  her  spouse,  parent,  sibling,
          mother-in-law,  father-in-law,  brother-in-law,  sister-in-law,  aunt,
          uncle,  or first cousin, (b) any person directly or indirectly owning,
          controlling or holding the power to vote 5% or more of the outstanding
          voting  securities of our company, the operating partnership or any of
          our  or  its  subsidiaries,  and  (c)  any  person 5% or more of whose
          outstanding  voting  securities  are  directly


                                       28

          or  indirectly  owned,  controlled  or  held with power to vote by our
          company,  the operating partnership or any of our or its subsidiaries;

     -    for  our  company,  the  operating  partnership  or  any of our or its
          subsidiaries  to  engage in any business where either the operation of
          such business or ownership of the assets related to such business will
          result in our company failing to satisfy the provisions of Section 856
          of  the  Internal  Revenue  Code;

     -    conducting  any  business  activities or the ownership of any asset of
          our  company (other than operating partnership interests) in each case
          other than through the operating partnership or one or more subsidiary
          partnerships  as  contemplated by the operating partnership agreement;
          and

     -    admission  of  a  substitute  or  additional  general  partner  of the
          operating  partnership.

     We  are  not  required  to  obtain the approval of the Series A Convertible
Preferred  Unit  holders  regarding  any of the foregoing actions if such action
provides  that  all  holders  of Series A Convertible Preferred Units shall as a
result  of  and  simultaneously  with  such  action  receive  no  less  than the
liquidation  preference  plus  the  applicable  premium  to which such Units are
entitled  under  the  operating  partnership  agreement.

SERIES  A  PREFERRED  SHARES

     The  Series  A  Preferred  Shares,  into  which  the  Series  A Convertible
Preferred  Units  are exchangeable, entitle the holders thereof to substantially
similar rights as those attendant to the Series A Convertible Preferred Units in
our  operating  partnership  with  respect  to  dividends, preemptive rights and
redemption  by  us.  In  addition, holders of the Series A Preferred Shares have
substantially  similar  approval rights as those held by holders of the Series A
Convertible  Preferred  Units.

     Each  Series  A  Preferred Share is convertible at the option of its holder
into  approximately  14.8 common shares, based on an initial conversion price of
$6.7555  per  common  share  and  subject  to anti-dilution adjustments upon the
occurrence  of  certain  events,  including  share  splits  and  combinations,
reclassifications,  reorganizations,  mergers, consolidations or asset sales, or
the  sale  of  common  shares or limited partnership units below 85% of the then
effective  conversion  price  (initially  $5.74).

     Subject  to  the terms of the standstill agreement described below, holders
of  Series  A Preferred Shares have the right to vote, on an as converted basis,
and  as  a  single class, with holders of our common shares on all matters other
than  the  designation,  election  or  removal  of  trustees.  The  holders of a
majority of the outstanding Series A Preferred Shares have the right to nominate
an  observer  to  our Board of Trustees.  For so long as the holders of Series A
Preferred  Shares  hold  at  least  five  percent  of  the  common  shares on an
as-converted and fully diluted basis, a majority of the Series A Preferred Share
holders  will  have the right, voting as a separate class, to nominate and elect
at least one member of our Board of Trustees, and in no event less than 11.1% of
the  total  members  of  the  Board of Trustees, if (i) they receive a favorable
ruling  from  the  Internal  Revenue  Service  which  permits CNL to continue to
qualify as a REIT under certain circumstances, (ii) there is a change in the law
providing  for  relief  comparable  to  that sought from the IRS as described in
clause  (i) above, (iii) they receive an opinion of counsel consistent with such
relief  or  (iv) there is a transfer of the Series A Convertible Preferred Units
whereby  the  holder  of  a  majority  of  the  Series  A Preferred Shares was a
transferee  of  Series  A  Convertible Preferred Units which were converted into
Series A Preferred Shares and could hold such shares without causing such holder
to  violate  certain  IRS  rules relating to qualifying as a REIT.  In addition,
upon  the  failure  of  our  company  or  our  operating  partnership to pay two
consecutive  dividends  or distributions on the Series A Preferred Shares or the
Series A Convertible Preferred Units, or our failure to maintain its status as a
REIT,  the  holders  of  the  Series  A  Preferred Shares will have the right to
nominate  and  elect  40%  of  the  members  of  our  Board  of  Trustees.

EXCEPTED  HOLDER  AGREEMENT

     In  connection  with  the  strategic  alliance,  we and CNL entered into an
Excepted Holder Agreement pursuant to which we exempted CNL from compliance with
the  9.9%  ownership  limitation  regarding  any  class  or series of our equity
securities  set  forth  in  our Declaration of Trust.  Under the Excepted Holder
Agreement, and in


                                       29

compliance  with  its  terms, CNL may own up to 100% of the outstanding Series A
Preferred  Shares  and  up  to  60%  of  the outstanding common shares (assuming
redemption  of  the  outstanding  common  limited  partnership  units for common
shares),  provided that the 60% ownership limit will rise to 100% if our company
or  our  operating partnership fails to pay in full for two consecutive calendar
quarters the dividends or distributions due on the Series A Preferred Shares and
Series  A  Convertible Preferred Units or if we fail to maintain our status as a
real  estate  investment  trust.

STANDSTILL  AGREEMENT

     We  have entered into a Standstill Agreement with CNL pursuant to which CNL
and  its affiliates have agreed not to acquire any additional securities of ours
other  than  as  contemplated  by  the  CNL  transaction,  participate  in  any
solicitation  of proxies, call meetings of our shareholders, seek representation
on  our  Board  of Trustees or vote its securities in excess of 40% of the total
issued and outstanding voting shares.  Securities of ours owned by CNL in excess
of  the  40%  limit  are voted by proxy in the same manner and proportion as the
common shares held by all other holders.  The Standstill Agreement provides that
it  will  remain in effect until April 21, 2009 unless terminated earlier by CNL
upon:

     -    the  failure  by  our  company or our operating partnership to pay two
          consecutive  quarterly  dividends  or  distributions  on  the Series A
          Preferred  Shares  or  the  Series  A  Convertible  Preferred  Units;

     -    our  failure  to  maintain  our  status  as  a  REIT;

     -    another person acquiring beneficial ownership in excess of 9.9% of our
          equity  shares  that  are  issued  and  outstanding;

     -    our  Board  of  Trustees  authorizing  certain  business  combinations
          involving  us;

     -    another  person's  submission  of  a  proposal  to us relating to such
          business  combinations that is not rejected by our Board as not in the
          best  interests  of  our  shareholders;

     -    in  connection  with  any  business  combination,  our  removal of any
          impediments  in  our  Declaration  of  Trust or Bylaws to any business
          combination;

     -    CNL's ownership of our securities, on a fully diluted basis, decreases
          to  less  than  9.9% of the common shares then outstanding, on a fully
          diluted  basis and the termination of the Excepted Holder Agreement or
          other exception to the ownership limit set forth in our Declaration of
          Trust  applicable  to  CNL  and  its  affiliates;  and

     -    the  material  failure  by our company or our operating partnership to
          comply  with  any of the terms of the Series A Preferred Shares or the
          Series  A  Convertible  Preferred  Units.

     Upon  the occurrence of any of the aforementioned events, the 60% ownership
limit on CNL's ability to acquire common shares set forth in the Excepted Holder
Agreement  and  the  restrictions set forth in the Standstill Agreement on CNL's
ability  to  acquire additional securities of our company will terminate and CNL
will  be permitted to acquire any amount of additional securities of our company
or  our  operating  partnership.

REGISTRATION  RIGHTS

     We have also entered into a Registration Rights Agreement with CNL pursuant
to  which  CNL  may,  subject  to certain cutbacks and restrictions, cause us to
register  the common shares and Series A Preferred Shares owned by CNL under the
Securities  Act  of  1933,  as  amended,  and under state securities laws of any
jurisdiction  requested  by  CNL.


                                       30

HOTEL  ACQUISITION  JOINT  VENTURE

     We  have  also have formed a joint venture limited partnership with CNL, in
which  our  operating  partnership is serving as the sole general partner and in
which  CNL  is  the  sole limited partner.  The joint venture agreement provides
that  CNL will invest up to $40 million, and HT will invest up to $20 million in
the  joint venture to acquire hotel real estate assets approved by an investment
committee  comprised  of an equal number of representatives from Hersha and CNL.
The  investments  in  the  joint  venture will be subject to satisfaction of the
conditions  to  closing  set  forth  in  the  joint  venture  agreement.

     On  August  29,  2003,  the  joint  venture made its first acquisition, the
Chelsea  Hampton  Inn,  New  York,  New  York  and accepted a $4 million capital
contribution  from  us  and  an  $8  million  capital  contribution  from  CNL.

     Net  cash  flow  from  operations of the joint venture will be distributed:
first,  to  CNL  to  provide  a 10.5% per annum return on its unreturned capital
contributions;  second, to us to provide an annual administrative fee of .35% of
the  cost of the joint venture's assets; third, to us to provide a 13% per annum
return  on our unreturned capital contributions; and thereafter to CNL and us in
proportion  to  our  respective  capital  contributions  to  the  joint venture.
Proceeds  from a sale of a joint venture property or other capital event for the
joint  venture  will  be  distributed:  first,  to  CNL  to  return  its capital
contributions;  second, to us to return our capital contributions; third, to CNL
to  provide  a  10.5%  annual  return  on  its unreturned capital contributions;
fourth,  to  us  to  provide  a  13%  annual  return  on  our unreturned capital
contributions;  and thereafter to CNL and us according to our respective capital
contributions.

     CNL's  limited  partnership interest in the joint venture generally will be
exchangeable,  at  CNL's  option,  for  common  limited partnership units of our
operating  partnership  or  common shares, based on an initial exchange price of
$6.7555  per  share,  subject  to  adjustment.

     As  part of the joint venture, until April 21, 2004, we must present all of
our  proposed acquisitions to the investment committee of the joint venture, and
we may only acquire such acquisition directly if the investment committee or CNL
fails  to  approve  that  acquisition  for  the  joint  venture.



                                       31

             FEDERAL INCOME TAX CONSEQUENCES OF OUR STATUS AS A REIT

     This  section  summarizes  the  federal  income  tax  issues that you, as a
shareholder,  may  consider  relevant.  Hunton  &  Williams LLP has acted as our
counsel,  has  reviewed  this  summary and is of the opinion that the discussion
contained  herein fairly summarizes the federal income tax consequences that are
likely  to  be material to a holder of common shares.  Because this section is a
summary, it does not address all of the tax issues that may be important to you.
In  addition, this section does not address the tax issues that may be important
to certain types of our shareholders that are subject to special treatment under
the  federal  income  tax  laws,  such  as  insurance  companies,  tax-exempt
organizations  (except  to  the  extent  discussed  in  "Taxation  of Tax-Exempt
Shareholders"  below),  financial  institutions  or broker-dealers, and non-U.S.
individuals  and  foreign  corporations  (except  to  the  extent  discussed  in
"Taxation  of  Non-U.S.  Shareholders"  below).

     The statements in this section and the opinion of Hunton & Williams LLP are
based  on the current federal income tax laws governing qualification as a REIT.
We  cannot  assure you that new laws, interpretations of law or court decisions,
any of which may take effect retroactively, will not cause any statement in this
section  to  be  inaccurate.

     WE  URGE  YOU  TO  CONSULT  YOUR OWN TAX ADVISOR REGARDING THE SPECIFIC TAX
CONSEQUENCES  TO YOU OF INVESTING IN OUR COMMON SHARES AND OF OUR ELECTION TO BE
TAXED  AS  A  REIT.  SPECIFICALLY,  YOU  SHOULD  CONSULT  YOUR  OWN  TAX ADVISOR
REGARDING  THE FEDERAL, STATE, LOCAL, FOREIGN AND OTHER TAX CONSEQUENCES OF SUCH
INVESTMENT AND ELECTION, AND REGARDING POTENTIAL CHANGES IN APPLICABLE TAX LAWS.

TAXATION  OF  OUR  COMPANY

     We  elected  to  be  taxed  as  a  REIT  under  the federal income tax laws
beginning  with  our  taxable  year ended December 31, 1999.  We believe that we
have  operated in a manner qualifying us as a REIT since our election and intend
to  continue  to  so  operate.  This  section  discusses  the laws governing the
federal  income  tax  treatment  of a REIT and its shareholders.  These laws are
highly  technical  and  complex.

     In the opinion of Hunton & Williams LLP, we qualified to be taxed as a REIT
under  the federal income tax laws for our taxable years ended December 31, 2000
through  December 31, 2003, and our organization and current and proposed method
of  operation  will  enable  us to continue to qualify as a REIT for our taxable
year  ending  December 31, 2004 and in the future.  You should be aware that the
opinion  is  based  on  current  law  and is not binding on the Internal Revenue
Service  or  any  court.  In  addition,  the  opinion  is  based  on  customary
assumptions  and  on our representations as to factual matters, all of which are
described in the opinion.  Our qualification as a REIT depends on our ability to
meet, on a continuing basis, qualification tests in the federal tax laws.  Those
qualification tests involve the percentage of income that we earn from specified
sources,  the  percentages  of our assets that fall within specified categories,
the  diversity of our share ownership and the percentage of our earnings that we
distribute.  Hunton  &  Williams  LLP  will not review our compliance with those
tests  on  a  continuing basis.  Accordingly, no assurance can be given that the
actual  results  of  our  operation for any particular taxable year will satisfy
such  requirements.  For  a discussion of the tax consequences of our failure to
qualify  as  a  REIT,  see  "-Failure  to  Qualify."

     If we qualify as a REIT, we generally will not be subject to federal income
tax  on  the taxable income that we distribute to our shareholders.  The benefit
of  that  tax  treatment is that it avoids the "double taxation," or taxation at
both  the  corporate  and shareholder levels, that generally results from owning
shares  in  a  corporation.  However,  we  will be subject to federal tax in the
following  circumstances:

     -    We  will  pay  federal  income  tax  on  taxable income, including net
          capital  gain,  that  we  do not distribute to shareholders during, or
          within  a  specified time period after, the calendar year in which the
          income  is  earned.

     -    We may be subject to the "alternative minimum tax" on any items of tax
          preference  that  we  do  not  distribute or allocate to shareholders.


                                       32

     -    We  will  pay  income  tax  at  the  highest  corporate  rate  on:

          -    net  income  from  the  sale  or  other  disposition  of property
               acquired  through  foreclosure  ("foreclosure  property") that we
               hold  primarily  for  sale to customers in the ordinary course of
               business,  and

          -    other  non-qualifying  income  from  foreclosure  property.

     -    We  will pay a 100% tax on net income from sales or other dispositions
          of  property,  other than foreclosure property, that we hold primarily
          for  sale  to  customers  in  the  ordinary  course  of  business.

     -    If  we  fail  to  satisfy  the  75% gross income test or the 95% gross
          income  test,  as  described  below  under  "Requirements  for
          Qualification-Income  Tests," and nonetheless continue to qualify as a
          REIT  because  we  meet other requirements, we will pay a 100% tax on:

          -    the gross income attributable to the greater of (1) the amount by
               which  we  fail  the 75% gross income test, and (2) the amount by
               which  90%  of  our  gross  income  exceeds  the amount of income
               qualifying  under  the  95%  gross  income  test,  in  each case,
               multiplied  by

          -    a  fraction  intended  to  reflect  our  profitability.

     -    If  we  fail to distribute during a calendar year at least the sum of:

          -    85%  of  our  REIT  ordinary  income  for  the  year,

          -    95%  of  our  REIT  capital  gain  net  income  for the year, and

          -    any  undistributed  taxable  income  from  earlier  periods,

          we  will  pay  a  4%  nondeductible  excise  tax  on the excess of the
          required  distribution  over  the  amount  we  actually  distributed.

     -    We may elect to retain and pay income tax on our net long-term capital
          gain.  In  that  case,  a  U.S.  shareholder  would  be  taxed  on its
          proportionate  share  of  our undistributed long-term capital gain (to
          the  extent  that  we  made  a  timely designation of such gain to the
          shareholders)  and  would  receive  a  credit  or  refund  for  its
          proportionate  share  of  the  tax  we  paid.

     -    We will be subject to a 100% excise tax on transactions with a taxable
          REIT  subsidiary  that  are  not  conducted  on an arm's-length basis.

     -    If  we  acquire  any asset from a C corporation, or a corporation that
          generally is subject to full corporate-level tax, in a merger or other
          transaction  in  which  we  acquire  a  basis  in  the  asset  that is
          determined  by  reference  either  to the C corporation's basis in the
          asset  or  to  another  asset,  we will pay tax at the highest regular
          corporate  rate  applicable  if  we  recognize  gain  on  the  sale or
          disposition  of  the  asset during the 10-year period after we acquire
          the  asset  provided  no  election  is  made for the transaction to be
          taxable  on  a  current basis. The amount of gain on which we will pay
          tax  is  the  lesser  of:

          -    the  amount  of gain that we recognize at the time of the sale or
               disposition,  and

          -    the  amount  of gain that we would have recognized if we had sold
               the  asset  at  the  time  we  acquired  it.


                                       33

REQUIREMENTS  FOR  QUALIFICATION

     A  REIT  is  a  corporation,  trust,  or association that meets each of the
following  requirements:

     1.   It  is  managed  by  one  or  more  trustees  or  directors.

     2.   Its  beneficial  ownership  is evidenced by transferable shares, or by
          transferable  certificates  of  beneficial  interest.

     3.   It  would  be  taxable  as  a  domestic  corporation, but for the REIT
          provisions  of  the  federal  income  tax  laws.

     4.   It is neither a financial institution nor an insurance company subject
          to  special  provisions  of  the  federal  income  tax  laws.

     5.   At  least 100 persons are beneficial owners of its shares or ownership
          certificates.

     6.   Not  more  than  50%  in  value of its outstanding shares or ownership
          certificates  is  owned,  directly  or  indirectly,  by  five or fewer
          individuals,  which  the  federal  income  tax  laws define to include
          certain  entities,  during  the  last  half  of  any  taxable  year.

     7.   It  elects  to  be  a  REIT,  or has made such election for a previous
          taxable  year,  and  satisfies  all  relevant  filing  and  other
          administrative  requirements  established  by  the  Internal  Revenue
          Service  that  must  be  met  to  elect  and  maintain  REIT  status.

     8.   It meets certain other qualification tests, described below, regarding
          the  nature  of  its  income  and  assets  and  the  amount  of  its
          distributions  to  shareholders.

     We  must  meet  requirements 1 through 4 during our entire taxable year and
must meet requirement 5 during at least 335 days of a taxable year of 12 months,
or  during a proportionate part of a taxable year of less than 12 months.  If we
comply  with  all  the  requirements  for  ascertaining  the  ownership  of  our
outstanding shares in a taxable year and have no reason to know that we violated
requirement  6,  we  will  be  deemed  to  have satisfied requirement 6 for that
taxable  year.  For purposes of determining share ownership under requirement 6,
an  "individual"  generally  includes  a  supplemental unemployment compensation
benefits  plan,  a  private  foundation, or a portion of a trust permanently set
aside  or  used  exclusively for charitable purposes.  An "individual," however,
generally  does  not  include  a  trust  that is a qualified employee pension or
profit  sharing  trust  under  the federal income tax laws, and beneficiaries of
such  a  trust  will  be  treated  as  holding our shares in proportion to their
actuarial  interests in the trust for purposes of requirement 6.  We have issued
sufficient  common  shares  with  sufficient  diversity  of ownership to satisfy
requirements  5  and  6.  In  addition,  our  Declaration of Trust restricts the
ownership  and  transfer  of our shares of beneficial interest so that we should
continue  to  satisfy  these  requirements.

     A  corporation  that  is a "qualified REIT subsidiary" (i.e., a corporation
that  is  100%  owned  by  a REIT with respect to which no TRS election has been
made)  is  not  treated  as  a  corporation  separate from its parent REIT.  All
assets,  liabilities, and items of income, deduction, and credit of a "qualified
REIT  subsidiary"  are  treated  as  assets,  liabilities,  and items of income,
deduction,  and  credit  of  the  REIT.  A  "qualified  REIT  subsidiary"  is  a
corporation,  all  of the capital stock of which is owned by the REIT.  Thus, in
applying the requirements described herein, any "qualified REIT subsidiary" that
we  own  will  be  ignored,  and  all  assets, liabilities, and items of income,
deduction,  and  credit  of  such  subsidiary  will  be  treated  as our assets,
liabilities,  and  items  of  income,  deduction,  and  credit.

     An  unincorporated  domestic  entity,  such as a limited liability company,
that has a single owner, generally is not treated as an entity separate from its
parent  for federal income tax purposes.  An unincorporated domestic entity with
two  or more owners is generally treated as a partnership for federal income tax
purposes.  In  the  case  of  a REIT that is a partner in a partnership that has
other  partners,  the  REIT  is treated as owning its proportionate share of the
assets of the partnership and as earning its allocable share of the gross income
of  the  partnership  for  purposes  of the applicable REIT qualification tests.
Thus,  our proportionate share of the assets, liabilities and items of income of


                                       34

our  operating  partnership and any other partnership, joint venture, or limited
liability  company  that  is  treated  as  a  partnership for federal income tax
purposes  in  which  we  have  acquired or will acquire an interest, directly or
indirectly (a "subsidiary partnership"), will be treated as our assets and gross
income  for  purposes  of  applying the various REIT qualification requirements.

     A  REIT  may  own  up  to  100%  of  the stock of one or more "taxable REIT
subsidiaries,"  or  TRSs.  A  TRS  is  a fully taxable corporation that may earn
income  that  would  not  be  qualifying income if earned directly by the parent
REIT.  However,  a  TRS  may  not  directly  or indirectly operate or manage any
hotels or health care facilities or provide rights to any brand name under which
any hotel or health care facility is operated.  The subsidiary and the REIT must
jointly  elect  to  treat the subsidiary as a TRS.  A TRS will pay income tax at
regular corporate rates on any income that it earns.  In addition, the TRS rules
limit  the deductibility of interest paid or accrued by a TRS to its parent REIT
to assure that the TRS is subject to an appropriate level of corporate taxation.
Further,  the  rules  impose a 100% excise tax on transactions between a TRS and
its  parent REIT or the REIT's tenants that are not conducted on an arm's-length
basis.  We  currently  have  four  TRSs,  (i) 44 New England Management Company,
which  leases  four  of  our  hotels,  (ii) HHM Leasehold Interests, Inc., which
leases 14 of our hotels, (iii) Hersha CNL TRS, Inc., which is owned by our joint
venture  with CNL and leases the one hotel owned by that joint venture, and (iv)
Hersha  PRA TRS, Inc., which is owned by our joint venture with PRA Glastonbury,
LLC  and  leases  the  hotel  owned  by  that joint venture.  See "-Taxable REIT
Subsidiaries."

INCOME  TESTS

     We  must  satisfy  two  gross  income  tests  annually  to  maintain  our
qualification  as  a  REIT.  First,  at  least  75% of our gross income for each
taxable year must consist of defined types of income that we derive, directly or
indirectly,  from  investments  relating  to  real property or mortgages on real
property  or  qualified  temporary  investment  income.  Qualifying  income  for
purposes  of  that  75%  gross  income  test  generally  includes:

     -    rents  from  real  property;

     -    interest  on  debt  secured  by  mortgages  on  real  property,  or on
          interests  in  real  property;

     -    dividends or other distributions on, and gain from the sale of, shares
          in  other  REITs;

     -    gain  from  the  sale  of  real  estate  assets;  and

     -    income  derived  from  the temporary investment of new capital that is
          attributable  to the issuance of our stock or a public offering of our
          debt  with  a maturity date of at least five years and that we receive
          during  the one-year period beginning on the date on which we received
          such  new  capital.

     Second,  in general, at least 95% of our gross income for each taxable year
must  consist  of income that is qualifying income for purposes of the 75% gross
income  test,  other  types  of  interest  and  dividends, gain from the sale or
disposition  of  stock  or  securities,  income  from hedging instruments or any
combination  of  these.  Gross  income  from  our  sale of property that we hold
primarily  for  sale to customers in the ordinary course of business is excluded
from both the numerator and the denominator in both income tests.  The following
paragraphs  discuss  the  specific  application of the gross income tests to us.

     Rents from Real Property.  Rent that we receive from our real property will
qualify  as  "rents from real property," which is qualifying income for purposes
of the 75% and 95% gross income tests, only if the following conditions are met:

     -    First,  the rent must not be based, in whole or in part, on the income
          or  profits  of  any person, but may be based on a fixed percentage or
          percentages  of  receipts  or  sales.

     -    Second,  neither  we  nor a direct or indirect owner of 10% or more of
          our  shares  may  own,  actually  or  constructively, 10% or more of a
          tenant  from whom we receive rent other than a TRS. If the tenant is a
          TRS,  such  TRS  may  not directly or indirectly operate or manage the
          related  property. Instead, the


                                       35

          property  must  be  operated  on  behalf  of  the  TRS by a person who
          qualifies  as an "independent contractor" and who is, or is related to
          a  person  who  is,  actively  engaged  in  the  trade  or business of
          operating  lodging  facilities  for any person unrelated to us and the
          TRS.  See  "-Taxable  REIT  Subsidiaries."

     -    Third,  if  the  rent  attributable  to  personal  property  leased in
          connection  with  a lease of real property is 15% or less of the total
          rent  received under the lease, then the rent attributable to personal
          property will qualify as rents from real property. However, if the 15%
          threshold is exceeded, the rent attributable to personal property will
          not  qualify  as  rents  from  real  property.

     -    Fourth,  we  generally must not operate or manage our real property or
          furnish  or  render  services  to  our  tenants, other than through an
          "independent  contractor"  who is adequately compensated and from whom
          we  do  not  derive  revenue.  However,  we  need not provide services
          through  an "independent contractor," but instead may provide services
          directly  to  our tenants, if the services are "usually or customarily
          rendered"  in  connection  with the rental of space for occupancy only
          and are not considered to be provided for the tenants' convenience. In
          addition,  we  may provide a minimal amount of "noncustomary" services
          to  the  tenants  of  a  property,  other  than through an independent
          contractor, as long as our income from the services does not exceed 1%
          of  our  income  from  the  related  property.

     Pursuant  to  percentage  leases,  our  lessees  lease the land, buildings,
improvements, furnishings and equipment comprising our hotels, for terms of five
years,  with  options  to  renew for terms of five years.  The percentage leases
provide  that the lessees are obligated to pay (1) the greater of a minimum base
rent  or  percentage  rent  and  (2)  "additional charges" or other expenses, as
defined  in  the  leases.  Percentage  rent  is  calculated by multiplying fixed
percentages by gross room revenues and gross food and beverage revenues for each
of  the  hotels.  Both  base  rent  and  the  thresholds  in the percentage rent
formulas  are  adjusted for inflation.  Base rent and percentage rent accrue and
are  due  monthly  or  quarterly.

     In  order  for  the  base  rent,  percentage rent and additional charges to
constitute  "rents  from real property," the percentage leases must be respected
as  true  leases  for  federal  income  tax  purposes and not treated as service
contracts,  joint ventures or some other type of arrangement.  The determination
of  whether  the percentage leases are true leases depends on an analysis of all
the surrounding facts and circumstances.  In making such a determination, courts
have  considered  a  variety  of  factors,  including  the  following:

     -    the  intent  of  the  parties;

     -    the  form  of  the  agreement;

     -    the  degree  of  control  over  the  property  that is retained by the
          property owner, or whether the lessee has substantial control over the
          operation  of  the  property  or  is  required  simply to use its best
          efforts  to  perform  its  obligations  under  the  agreement;  and

     -    the  extent  to which the property owner retains the risk of loss with
          respect  to  the  property,  or  whether  the lessee bears the risk of
          increases  in operating expenses or the risk of damage to the property
          or the potential for economic gain or appreciation with respect to the
          property.

In addition, federal income tax law provides that a contract that purports to be
a service contract or a partnership agreement will be treated instead as a lease
of property if the contract is properly treated as such, taking into account all
relevant  factors,  including  whether  or  not:

     -    the  service  recipient  is  in  physical  possession of the property;

     -    the  service  recipient  controls  the  property;


                                       36

     -    the  service  recipient  has  a  significant  economic  or  possessory
          interest  in  the property, or whether the property's use is likely to
          be dedicated to the service recipient for a substantial portion of the
          useful  life  of  the property, the recipient shares the risk that the
          property  will  decline  in  value,  the  recipient  shares  in  any
          appreciation  in  the  value  of the property, the recipient shares in
          savings  in  the property's operating costs or the recipient bears the
          risk  of  damage  to  or  loss  of  the  property;

     -    the  service  provider  bears  the  risk  of  substantially diminished
          receipts  or  substantially  increased  expenditures  if  there  is
          nonperformance  under  the  contract;

     -    the  service  provider  uses  the  property  concurrently  to  provide
          significant  services  to entities unrelated to the service recipient;
          and

     -    the total contract price substantially exceeds the rental value of the
          property  for  the  contract  period.

Since  the determination whether a service contract should be treated as a lease
is  inherently factual, the presence or absence of any single factor will not be
dispositive  in  every  case.

     Hunton  & Williams LLP is of the opinion that the percentage leases will be
treated  as true leases for federal income tax purposes.  Such opinion is based,
in  part,  on  the  following  facts:

     -    we  and the lessees intend for our relationship to be that of a lessor
          and  lessee  and  such relationship is documented by lease agreements;

     -    the  lessees have the right to the exclusive possession, use and quiet
          enjoyment  of  the  hotels  during  the term of the percentage leases;

     -    the  lessees  bear  the  cost  of, and are responsible for, day-to-day
          maintenance  and  repair  of  the  hotels,  other  than  the  cost  of
          maintaining  underground  utilities,  structural  elements and capital
          improvements,  and  generally  dictate  how  the  hotels are operated,
          maintained  and  improved;

     -    the  lessees  bear  the  costs  and  expenses of operating the hotels,
          including  the  cost  of any inventory used in their operation, during
          the term of the percentage leases, other than real estate and personal
          property  taxes  and  property  and  casualty  insurance  premiums;

     -    the  lessees  benefit  from  any  savings in the cost of operating the
          hotels  during  the  term  of  the  percentage  leases;

     -    the  lessees  generally  have  indemnified  us against all liabilities
          imposed  on  us  during the term of the percentage leases by reason of
          (1)  injury  to persons or damage to property occurring at the hotels,
          (2) the lessees' use, management, maintenance or repair of the hotels,
          (3)  any  environmental  liability caused by acts or grossly negligent
          failures  to  act of the lessees, (4) taxes and assessments in respect
          of  the  hotels  that  are  the  obligations of the lessees or (5) any
          breach  of  the percentage leases or of any sublease of a hotel by the
          lessees;

     -    the lessees are obligated to pay substantial fixed rent for the period
          of  use  of  the  hotels;

     -    the  lessees  stand  to  incur  substantial losses or reap substantial
          gains  depending  on  how  successfully  they  operate  the  hotels;

     -    we  cannot use the hotels concurrently to provide significant services
          to  entities  unrelated  to  the  lessees;  and

     -    the  total  contract  price  under  the  percentage  leases  does  not
          substantially  exceed  the  rental value of the hotels for the term of
          the  percentage  leases.


                                       37

     Investors  should  be  aware  that  there  are  no  controlling  Treasury
regulations, published rulings or judicial decisions involving leases with terms
substantially the same as the percentage leases that discuss whether such leases
constitute  true  leases  for  federal  income  tax purposes.  If the percentage
leases  are characterized as service contracts or partnership agreements, rather
than  as true leases, part or all of the payments that our operating partnership
and  its subsidiaries receive from the lessees may not be considered rent or may
not  otherwise satisfy the various requirements for qualification as "rents from
real  property." In that case, we likely would not be able to satisfy either the
75% or 95% gross income test and, as a result, would lose our REIT status unless
we qualify for relief, as described below under "Failure to Satisfy Gross Income
Tests".

     As  described  above,  in  order for the rent that we receive to constitute
"rents  from  real property," several other requirements must be satisfied.  One
requirement is that the percentage rent must not be based in whole or in part on
the income or profits of any person.  The percentage rent, however, will qualify
as "rents from real property" if it is based on percentages of receipts or sales
and  the  percentages:

     -    are  fixed  at  the  time  the  percentage  leases  are  entered into;

     -    are  not  renegotiated  during  the term of the percentage leases in a
          manner  that  has  the  effect  of basing percentage rent on income or
          profits;  and

     -    conform  with  normal  business  practice.

     More  generally,  the  percentage rent will not qualify as "rents from real
property"  if,  considering  the  percentage  leases  and  all  the  surrounding
circumstances,  the  arrangement does not conform with normal business practice,
but  is  in  reality  used as a means of basing the percentage rent on income or
profits.  Since  the  percentage rent is based on fixed percentages of the gross
revenue  from  the  hotels that are established in the percentage leases, and we
have  represented  that  the percentages (1) will not be renegotiated during the
terms  of  the  percentage  leases in a manner that has the effect of basing the
percentage  rent  on  income  or  profits  and  (2) conform with normal business
practice, the percentage rent should not be considered based in whole or in part
on  the income or profits of any person.  Furthermore, we have represented that,
with  respect  to  other hotel properties that we acquire in the future, we will
not charge rent for any property that is based in whole or in part on the income
or  profits of any person, except by reason of being based on a fixed percentage
of  gross  revenues,  as  described  above.

     Second,  we  must  not  own, actually or constructively, 10% or more of the
stock  or  the  assets  or  net profits of any lessee (a "related party tenant")
other  than  a TRS.  The constructive ownership rules generally provide that, if
10%  or  more in value of our shares is owned, directly or indirectly, by or for
any person, we are considered as owning the stock owned, directly or indirectly,
by  or for such person.  We do not own any stock or any assets or net profits of
any  lessee  directly  or  indirectly,  other than indirect ownership of our TRS
lessees,  44  New  England  Management  Company,  HHM Leasehold Interests, Inc.,
Hersha  CNL TRS, Inc., and Hersha PRA TRS, Inc.  In addition, our Declaration of
Trust  prohibits  transfers of our shares that would cause us to own actually or
constructively, 10% or more of the ownership interests in a lessee (other than a
TRS).  Based  on the foregoing, we should never own, actually or constructively,
10%  or  more  of any lessee other than a TRS.  Furthermore, we have represented
that,  with  respect to other hotel properties that we acquire in the future, we
will  not  rent  any  property  to  a  related  party tenant (other than a TRS).
However,  because  the  constructive  ownership  rules  are  broad and it is not
possible  to monitor continually direct and indirect transfers of our shares, no
absolute  assurance can be given that such transfers or other events of which we
have  no  knowledge  will  not  cause  us to own constructively 10% or more of a
lessee  other  than  a  TRS  at  some  future  date.

     As described above, we may own up to 100% of the stock of one or more TRSs.
A  TRS is a fully taxable corporation that is permitted to lease hotels from the
related REIT as long as it does not directly or indirectly operate or manage any
hotels or health care facilities or provide rights to any brand name under which
any  hotel  or  health care facility is operated.  However, rent that we receive
from a TRS will qualify as "rents from real property" as long as the property is
operated  on  behalf of the TRS by an "independent contractor" who is adequately
compensated,  who  does not, directly or through its stockholders, own more than
35%  of our shares, taking into account certain ownership attribution rules, and
who  is,  or  is  related  to  a person who is, actively engaged in the trade or
business of operating "qualified lodging facilities" for any person unrelated to
us  and  the  TRS  lessee  (an "eligible


                                       38

independent  contractor").  A "qualified lodging facility" is a hotel, motel, or
other  establishment  more than one-half of the dwelling units in which are used
on  a  transient  basis,  unless  wagering  activities  are  conducted  at or in
connection  with  such  facility by any person who is engaged in the business of
accepting  wagers and who is legally authorized to engage in such business at or
in  connection  with  such  facility.  A  "qualified  lodging facility" includes
customary  amenities and facilities operated as part of, or associated with, the
lodging  facility  as  long  as  such amenities and facilities are customary for
other properties of a comparable size and class owned by other unrelated owners.
See  "-Taxable  REIT  Subsidiaries."

     We  have formed several TRSs to lease our hotels.  Our TRSs have engaged an
"eligible  independent  contractor,"  HHMLP,  to  operate  the related hotels on
behalf  of  such  TRSs.  Furthermore,  we have represented that, with respect to
properties that we lease to our TRSs in the future, each such TRS will engage an
"eligible  independent  contractor"  to  manage and operate the hotels leased by
such  TRS.

     Third,  the rent attributable to the personal property leased in connection
with  the  lease  of  a  hotel  must  not  be greater than 15% of the total rent
received  under  the  lease.  The  rent  attributable  to  the personal property
contained  in  a hotel is the amount that bears the same ratio to total rent for
the  taxable  year  as  the  average  of  the fair market values of the personal
property  at  the  beginning  and  at  the  end of the taxable year bears to the
average  of  the  aggregate  fair  market  values  of both the real and personal
property  contained in the hotel at the beginning and at the end of such taxable
year  (the  "personal  property ratio").  With respect to each hotel, we believe
either  that  the  personal  property  ratio  is  less than 15% or that any rent
attributable  to  excess  personal  property  will not jeopardize our ability to
qualify  as  a  REIT.  There  can  be  no  assurance, however, that the Internal
Revenue  Service  would  not  challenge  our  calculation of a personal property
ratio,  or  that  a  court would not uphold such assertion.  If such a challenge
were successfully asserted, we could fail to satisfy the 75% or 95% gross income
test  and  thus  potentially  lose  our  REIT  status.

     Fourth, we cannot furnish or render noncustomary services to the tenants of
our  hotels,  or manage or operate our hotels, other than through an independent
contractor  who  is  adequately  compensated  and  from whom we do not derive or
receive  any  income.  However,  we  need  not  provide  services  through  an
"independent  contractor,"  but  instead  may  provide  services directly to our
tenants,  if  the  services  are "usually or customarily rendered" in connection
with  the  rental  of  space  for  occupancy  only  and are not considered to be
provided  for the tenants' convenience.  Provided that the percentage leases are
respected  as true leases, we should satisfy that requirement, because we do not
perform any services other than customary ones for the lessees.  In addition, we
may  provide  a  minimal  amount  of "noncustomary" services to the tenants of a
property,  other  than  through an independent contractor, as long as our income
from  the  services  does not exceed 1% of our income from the related property.
Finally,  we  may  own  up  to  100% of the stock of one or more TRSs, which may
provide noncustomary services to our tenants without tainting our rents from the
related  hotels.  We will not perform any services other than customary ones for
our  lessees,  unless such services are provided through independent contractors
or  TRSs.  Furthermore,  we  have  represented that, with respect to other hotel
properties  that  we  acquire  in  the  future, we will not perform noncustomary
services for the lessee of the property to the extent that the provision of such
services  would  jeopardize  our  REIT  status.

     If  a  portion of the rent that we receive from a hotel does not qualify as
"rents  from  real  property" because the rent attributable to personal property
exceeds  15%  of the total rent for a taxable year, the portion of the rent that
is  attributable to personal property will not be qualifying income for purposes
of  either the 75% or 95% gross income test.  Thus, if such rent attributable to
personal  property,  plus  any  other  income  that  is nonqualifying income for
purposes  of  the 95% gross income test, during a taxable year exceeds 5% of our
gross  income  during the year, we would lose our REIT status.  If, however, the
rent  from  a  particular  hotel  does not qualify as "rents from real property"
because  either  (1)  the  percentage  rent is considered based on the income or
profits  of  the related lessee, (2) the lessee either is a related party tenant
or  fails  to  qualify  for  the  exception to the related party tenant rule for
qualifying  TRSs  or  (3) we furnish noncustomary services to the tenants of the
hotel,  or  manage  or  operate  the  hotel,  other  than  through  a qualifying
independent  contractor or a TRS, none of the rent from that hotel would qualify
as  "rents  from  real  property."  In  that case, we might lose our REIT status
because  we  would be unable to satisfy either the 75% or 95% gross income test.
In  addition  to  the  rent,  the lessees are required to pay certain additional
charges.  To  the  extent  that  such  additional  charges  represent either (1)
reimbursements of amounts that we are obligated to pay to third parties, such as
a  lessee's proportionate share of a property's operational or capital expenses,
or  (2)  penalties  for nonpayment or late payment of such amounts, such charges
should  qualify as "rents from real


                                       39

property."  However,  to  the  extent that such charges do not qualify as "rents
from real property," they instead will be treated as interest that qualifies for
the  95%  gross  income  test.

     Interest.  The  term  "interest"  generally  does  not  include  any amount
received or accrued, directly or indirectly, if the determination of such amount
depends in whole or in part on the income or profits of any person.  However, an
amount  received  or  accrued  generally  will  not  be  excluded  from the term
"interest"  solely  by  being  based  on  a  fixed  percentage or percentages of
receipts or sales.  Furthermore, to the extent that interest from a loan that is
based  on the profit or net cash proceeds from the sale of the property securing
the  loan  constitutes a "shared appreciation provision," income attributable to
such  participation feature will be treated as gain from the sale of the secured
property.

     Prohibited  Transactions.  A  REIT  will incur a 100% tax on the net income
derived  from  any sale or other disposition of property, other than foreclosure
property,  that  the  REIT holds primarily for sale to customers in the ordinary
course  of  a  trade  or  business.  We believe that none of our assets are held
primarily for sale to customers and that a sale of any of our assets will not be
in  the  ordinary  course  of  our  business.  Whether  a  REIT  holds  an asset
"primarily  for sale to customers in the ordinary course of a trade or business"
depends,  however,  on  the facts and circumstances in effect from time to time,
including those related to a particular asset.  Nevertheless, we will attempt to
comply  with  the terms of safe-harbor provisions in the federal income tax laws
prescribing  when  an  asset  sale  will  not  be  characterized as a prohibited
transaction.  We  cannot  assure  you,  however,  that  we  can  comply with the
safe-harbor  provisions  or  that  we  will  avoid  owning  property that may be
characterized  as  property that we hold "primarily for sale to customers in the
ordinary  course  of  a  trade  or  business."

     Foreclosure  Property.  We  will be subject to tax at the maximum corporate
rate  on  any income from foreclosure property, other than income that otherwise
would  be  qualifying  income  for  purposes  of the 75% gross income test, less
expenses  directly connected with the production of that income.  However, gross
income from foreclosure property will qualify under the 75% and 95% gross income
tests.  Foreclosure  property  is any real property, including interests in real
property,  and  any  personal  property  incident  to  such  real  property:

     -    that  is  acquired  by  a REIT as the result of the REIT having bid on
          such  property  at  foreclosure,  or  having  otherwise  reduced  such
          property  to  ownership  or possession by agreement or process of law,
          after  there  was a default or default was imminent on a lease of such
          property  or  on  indebtedness  that  such  property  secured;

     -    for which the related loan was acquired by the REIT at a time when the
          default  was  not  imminent  or  anticipated;  and

     -    for  which  the  REIT makes a proper election to treat the property as
          foreclosure  property.

We  have  no  foreclosure  property as of the date of this prospectus.  Property
generally ceases to be foreclosure property at the end of the third taxable year
following the taxable year in which the REIT acquired the property, or longer if
an  extension  is granted by the Secretary of the Treasury.  However, this grace
period  terminates and foreclosure property ceases to be foreclosure property on
the  first  day:

     -    on  which a lease is entered into for the property that, by its terms,
          will give rise to income that does not qualify for purposes of the 75%
          gross  income  test, or any amount is received or accrued, directly or
          indirectly, pursuant to a lease entered into on or after such day that
          will give rise to income that does not qualify for purposes of the 75%
          gross  income  test;

     -    on  which  any  construction  takes  place on the property, other than
          completion of a building or any other improvement, where more than 10%
          of  the  construction was completed before default became imminent; or

     -    which  is  more  than 90 days after the day on which the REIT acquired
          the  property and the property is used in a trade or business which is
          conducted  by  the  REIT, other than through an independent contractor
          from  whom  the  REIT  itself  does  not derive or receive any income.


                                       40

     Hedging  Transactions.  From  time to time, we or our operating partnership
may enter into hedging transactions with respect to one or more of our assets or
liabilities.  Our  hedging  activities  may  include entering into interest rate
swaps, caps, and floors, options to purchase such items, and futures and forward
contracts.  To  the  extent  that we or our operating partnership enters into an
interest  rate  swap  or  cap  contract,  option, futures contract, forward rate
agreement,  or  any  similar  financial  instrument  to  hedge  our indebtedness
incurred  to  acquire or carry "real estate assets," any periodic income or gain
from  the  disposition of such contract should be qualifying income for purposes
of  the 95% gross income test, but not the 75% gross income test.  To the extent
that  we  or  our  operating  partnership  hedges  with other types of financial
instruments,  or  in  other  situations, it is not entirely clear how the income
from  those transactions will be treated for purposes of the gross income tests.
We  intend  to  structure  any  hedging  transactions  in a manner that does not
jeopardize  our  status  as  a  REIT.

     Failure  to  Satisfy Gross Income Tests.  If we fail to satisfy one or both
of the gross income tests for any taxable year, we nevertheless may qualify as a
REIT  for  that  year  if  we qualify for relief under certain provisions of the
federal  income  tax  laws.  Those relief provisions generally will be available
if:

     -    our  failure to meet such tests is due to reasonable cause and not due
          to  willful  neglect;

     -    we  attach  a schedule of the sources of our income to our tax return;
          and

     -    any  incorrect  information  on the schedule was not due to fraud with
          intent  to  evade  tax.

     We  cannot  predict, however, whether in all circumstances we would qualify
for  the relief provisions.  In addition, as discussed above in "Taxation of Our
Company,"  even if the relief provisions apply, we would incur a 100% tax on the
gross  income attributable to the greater of (1) the amount by which we fail the
75%  gross income test and (2) the amount by which 90% of our income exceeds the
amount  of  income  qualifying  under  the  95% gross income test, in each case,
multiplied  by  a  fraction  intended  to  reflect  our  profitability.

ASSET  TESTS

     To maintain our qualification as a REIT, we also must satisfy the following
asset  tests  at  the end of each quarter of each taxable year.  First, at least
75%  of  the  value  of  our  total  assets  must  consist  of:

     -    cash  or  cash  items,  including  certain  receivables;

     -    government  securities;

     -    interests  in  real  property,  including  leaseholds  and  options to
          acquire  real  property  and  leaseholds;

     -    interests  in  mortgages  on  real  property;

     -    stock  in  other  REITs;  and

     -    investments  in  stock  or debt instruments during the one-year period
          following  our  receipt  of  new  capital that we raise through equity
          offerings  or  offerings  of  debt  with  at  least  a five-year term.

     Second,  of  our investments not included in the 75% asset class, the value
of our interest in any one issuer's securities may not exceed 5% of the value of
our  total  assets.

     Third, we may not own more than 10% of the voting power or value of any one
issuer's  outstanding  securities.

     Fourth,  no  more  than 20% of the value of our total assets may consist of
the  securities  of  one  or  more  TRSs.


                                       41

     Fifth, no more than 25% of the value of our total assets may consist of the
securities  of TRSs and other non-TRS taxable subsidiaries and other assets that
are  not  qualifying  assets  for  purposes  of  the  75%  asset  test.

     For  purposes  of  the  second and third asset tests, the term "securities"
does not include stock in another REIT, equity or debt securities of a qualified
REIT  subsidiary  or  TRS, mortgage loans that constitute real estate assets, or
equity  interests  in  a partnership.  The term "securities," however, generally
includes  debt  securities  issued by a partnership or another REIT, except that
certain  "straight debt" securities are not treated as "securities" for purposes
of  the 10% value test (for example, qualifying debt securities of a partnership
or  REIT in which neither we nor any TRS of ours owns an equity interest or of a
partnership  if  we  own  at  least  a 20% profits interest in the partnership).

     We  believe  that our existing assets are qualifying assets for purposes of
the  75%  asset test.  We also believe that any additional real property that we
acquire  and  temporary  investments  that  we make generally will be qualifying
assets  for  purposes  of the 75% asset test.  We will monitor the status of our
acquired  assets  for  purposes  of  the various asset tests and will manage our
portfolio  in  order  to  comply  at  all  times with such tests.  If we fail to
satisfy  the  asset tests at the end of a calendar quarter, we will not lose our
REIT  status  if:

     -    we  satisfied  the  asset  tests  at the end of the preceding calendar
          quarter;  and

     -    the  discrepancy  between  the  value of our assets and the asset test
          requirements arose from changes in the market values of our assets and
          was  not  wholly  or  partly  caused by the acquisition of one or more
          non-qualifying  assets.

     If we did not satisfy the condition described in the second item, above, we
still could avoid disqualification by eliminating any discrepancy within 30 days
after  the  close  of  the  calendar  quarter  in  which  it  arose.

DISTRIBUTION  REQUIREMENTS

     Each  taxable  year,  we must distribute dividends, other than capital gain
dividends and deemed distributions of retained capital gain, to our shareholders
in  an  aggregate  amount  at  least  equal  to:

     -    the  sum  of

          -    90%  of our "REIT taxable income," computed without regard to the
               dividends  paid  deduction  and our net capital gain or loss, and

          -    90%  of  our  after-tax  net  income,  if  any,  from foreclosure
               property,  minus

     -    the  sum  of  certain  items  of  non-cash  income.

     We must pay such distributions in the taxable year to which they relate, or
in  the  following  taxable year if we declare the distribution before we timely
file  our  federal income tax return for the year and pay the distribution on or
before  the  first  regular  dividend  payment  date  after  such  declaration.

     We  will  pay  federal  income tax on taxable income, including net capital
gain,  that  we  do  not distribute to shareholders.  Furthermore, if we fail to
distribute  during  a  calendar  year,  or  by  the end of January following the
calendar  year  in  the  case of distributions with declaration and record dates
falling  in  the  last  three  months of the calendar year, at least the sum of:

     -    85%  of  our  REIT  ordinary  income  for  such  year,

     -    95%  of  our  REIT  capital  gain  income  for  such  year,  and

     -    any  undistributed  taxable  income  from  prior  periods,


                                       42

we  will  incur  a  4%  nondeductible  excise tax on the excess of such required
distribution  over  the  amounts we actually distribute.  We may elect to retain
and  pay  income  tax  on the net long-term capital gain we receive in a taxable
year.  See "-Taxation of Taxable U.S. Shareholders."  If we so elect, we will be
treated  as  having  distributed any such retained amount for purposes of the 4%
nondeductible  excise  tax  described  above.  We  have  made,  and we intend to
continue  to  make,  timely  distributions  sufficient  to  satisfy  the  annual
distribution  requirements  and  to  avoid  corporate  income  tax  and  the  4%
nondeductible  excise  tax.

     It  is  possible  that,  from  time  to  time,  we  may  experience  timing
differences  between  the  actual  receipt  of  income  and  actual  payment  of
deductible  expenses  and  the  inclusion  of  that income and deduction of such
expenses in arriving at our REIT taxable income.  For example, we may not deduct
recognized  capital  losses  from  our  "REIT  taxable  income."  Further, it is
possible  that,  from  time  to time, we may be allocated a share of net capital
gain attributable to the sale of depreciated property that exceeds our allocable
share  of  cash attributable to that sale.  As a result of the foregoing, we may
have  less  cash  than  is  necessary to distribute taxable income sufficient to
avoid  corporate  income tax and the excise tax imposed on certain undistributed
income  or  even to meet the 90% distribution requirement.  In such a situation,
we  may  need  to  borrow  funds or issue additional common or preferred shares.

     Under  certain  circumstances,  we may be able to correct a failure to meet
the  distribution requirement for a year by paying "deficiency dividends" to our
shareholders  in  a later year.  We may include such deficiency dividends in our
deduction  for  dividends paid for the earlier year.  Although we may be able to
avoid  income  tax  on  amounts  distributed as deficiency dividends, we will be
required  to  pay interest to the Internal Revenue Service based upon the amount
of  any  deduction  we  take  for  deficiency  dividends.

TAXABLE  REIT  SUBSIDIARIES

     As described above, we may own up to 100% of the stock of one or more TRSs.
A  TRS  is  a  fully  taxable corporation that may earn income that would not be
qualifying  income  if earned directly by us.  A TRS may provide services to our
lessees  and  perform  activities  unrelated to our lessees, such as third-party
management,  development, and other independent business activities.  However, a
taxable  REIT  subsidiary  may  not directly or indirectly operate or manage any
hotels or health care facilities or provide rights to any brand name under which
any  hotel  or  health  care  facility  is  operated.

     We and our corporate subsidiary must elect for the subsidiary to be treated
as  a  TRS.  A corporation of which a qualifying TRS directly or indirectly owns
more  than  35%  of the voting power or value of the stock will automatically be
treated  as  a  TRS.  Overall,  no  more than 20% of the value of our assets may
consist  of securities of one or more TRSs, and no more than 25% of the value of
our  assets may consist of the securities of TRSs and other taxable subsidiaries
and  other  assets  that are not qualifying assets for purposes of the 75% asset
test.

     Rent  that  we  receive  from  our  TRSs  will  qualify as "rents from real
property"  as  long as the property is operated on behalf of the TRS by a person
who  qualifies  as  an  "independent  contractor" and who is, or is related to a
person who is, actively engaged in the trade or business of operating "qualified
lodging  facilities"  for  any  person  unrelated  to  us and the TRS lessee (an
"eligible  independent contractor").  A "qualified lodging facility" is a hotel,
motel,  or other establishment more than one-half of the dwelling units in which
are used on a transient basis, unless wagering activities are conducted at or in
connection  with  such  facility by any person who is engaged in the business of
accepting  wagers and who is legally authorized to engage in such business at or
in  connection  with  such  facility.  A  "qualified  lodging facility" includes
customary  amenities and facilities operated as part of, or associated with, the
lodging  facility  as  long  as  such amenities and facilities are customary for
other properties of a comparable size and class owned by other unrelated owners.

     We  have  formed  four  TRSs to lease hotels in which we own interests.  We
lease  four  of  our hotels to 44 New England Management Company, a TRS owned by
our  operating  partnership.  A  subsidiary  of  HHMLP, HHM Leasehold Interests,
Inc.,  which  is  a  TRS  in  which  HHMLP  owns a 99% interest and in which our
operating  partnership  owns  a 1% interest, leases 14 of our hotels.  Our joint
venture  with  CNL has formed Hersha CNL TRS, Inc., which is one of our TRSs and
leases the hotel owned by that joint venture.  Similarly, our joint venture with
PRA  Glastonbury,  LLC has formed Hersha PRA TRS, Inc., which is one of our TRSs
and  leases  the hotel owned by that joint venture.  We may form new TRSs in the
future.  Each of these existing TRSs has engaged HHMLP, an


                                       43

"eligible  independent contractor," to operate the related hotels on its behalf.
Furthermore,  we have represented that, with respect to properties that we lease
to  our  TRSs  in the future, each such TRS will engage an "eligible independent
contractor"  to  manage  and  operate  the  hotels  leased  by  such  TRS.

     The  TRS rules limit the deductibility of interest paid or accrued by a TRS
to  us  to  assure  that the TRS is subject to an appropriate level of corporate
taxation.  Further,  the  rules impose a 100% excise tax on certain transactions
between  a  TRS  and us or our tenants that are not conducted on an arm's-length
basis.  We  believe  that  all  transactions between us and each of our existing
TRSs  have  been  and  will  be  conducted  on  an  arm's-length  basis.

RECORDKEEPING  REQUIREMENTS

     We  must  maintain  certain  records  in  order  to  qualify as a REIT.  In
addition,  to  avoid  a  monetary  penalty,  we  must request on an annual basis
information  from  our shareholders designed to disclose the actual ownership of
our  outstanding shares of beneficial interest.  We have complied, and we intend
to  continue  to  comply,  with  these  requirements.

FAILURE  TO  QUALIFY

     If  we  fail  to  qualify  as  a  REIT  in  any taxable year, and no relief
provision  applies, we would be subject to federal income tax and any applicable
alternative  minimum  tax  on our taxable income at regular corporate rates.  In
calculating  our taxable income in a year in which we fail to qualify as a REIT,
we  would  not  be able to deduct amounts paid out to shareholders.  In fact, we
would  not  be  required to distribute any amounts to shareholders in that year.
In  such  event,  to  the  extent  of  our  current and accumulated earnings and
profits,  distributions  to  most  domestic  non-corporate  shareholders  would
generally be taxable at capital gains tax rates.  Subject to certain limitations
of the federal income tax laws, corporate shareholders might be eligible for the
dividends  received  deduction.  Unless  we  qualified for relief under specific
statutory  provisions, we also would be disqualified from taxation as a REIT for
the four taxable years following the year during which we ceased to qualify as a
REIT.  We  cannot predict whether in all circumstances we would qualify for such
statutory  relief.

TAXATION  OF  TAXABLE  U.S.  SHAREHOLDERS

     The  term  "U.S.  shareholder"  means  a  holder of common shares that, for
United  States  federal  income  tax  purposes,  is:

     -    a  citizen  or  resident  of  the  United  States,

     -    a  corporation  or  partnership  (including  an  entity  treated  as a
          corporation  or  partnership)  for  U.S.  federal  income tax purposes
          created  or  organized  under  the  laws  of  the  United  States or a
          political  subdivision  of  the  United  States,

     -    an  estate  whose  income  from  sources  outside the United States is
          includible  in  gross  income  for  United  States  federal income tax
          purposes  regardless  of  its  source,  or

     -    any  trust  with  respect  to  which

          -    a  United  States  court  is able to exercise primary supervision
               over  its  administration,  and

          -    one  or  more United States persons have the authority to control
               all  of  its  substantial  decisions.

     As  long  as  we  qualify  as  a  REIT,  a  taxable "U.S. shareholder" must
generally  take  into  account  as ordinary income distributions made out of our
current  or accumulated earnings and profits that we do not designate as capital
gain  dividends  or retained long-term capital gain. A U.S. shareholder will not
qualify  for  the  dividends  received  deduction  generally  available  to
corporations.  In  addition, dividends paid to a U.S. shareholder generally will
not  qualify for the new 15% tax rate for "qualified dividend income."  The Jobs
and  Growth  Tax  Relief Reconciliation Act of 2003 reduced the maximum tax rate
for qualified dividend income from 38.6% to 15% for tax years 2003


                                       44

through  2008.  Without  future  congressional  action,  the maximum tax rate on
qualified  dividend income will move to 35% in 2009 and 39.6% in 2011. Qualified
dividend  income  generally  includes  dividends  paid to most U.S. noncorporate
taxpayers by domestic C corporations and certain qualified foreign corporations.
Because we are not generally subject to federal income tax on the portion of our
REIT  taxable  income  distributed  to  our  shareholders  (see "Taxation of Our
Company"  above),  our  dividends generally will not be eligible for the new 15%
rate on qualified dividend income. As a result, our ordinary REIT dividends will
continue  to  be  taxed  at  the  higher tax rate applicable to ordinary income.
Currently, the highest marginal individual income tax rate on ordinary income is
35%.  However,  the 15% tax rate for qualified dividend income will apply to our
ordinary  REIT  dividends  (i)  attributable  to  dividends  received by us from
non-REIT  corporations, such as our TRSs, and (ii) to the extent attributable to
income upon which we have paid corporate income tax (e.g., to the extent that we
distribute less than 100% of our taxable income). In general, to qualify for the
reduced  tax  rate  on  qualified  dividend  income, a shareholder must hold our
common  shares  for more than 60 days during the 120-day period beginning on the
date  that  is  60  days  before  the  date  on  which  our common shares become
ex-dividend.

     A  U.S.  shareholder generally will take into account distributions that we
designate  as capital gain dividends as long-term capital gain without regard to
the  period  for  which  the  U.S.  shareholder  has  held our common shares.  A
corporate  U.S.  shareholder,  however,  may  be  required to treat up to 20% of
certain  capital  gain  dividends  as  ordinary  income.

     A  U.S.  shareholder  will not incur tax on a distribution in excess of our
current and accumulated earnings and profits if the distribution does not exceed
the  adjusted  basis  of  the  U.S.  shareholder's  common shares.  Instead, the
distribution  will  reduce  the  adjusted  basis  of  such common shares. A U.S.
shareholder  will  recognize  a  distribution  in excess of both our current and
accumulated  earnings  and  profits and the U.S. shareholder's adjusted basis in
his  or  her common shares as long-term capital gain, or short-term capital gain
if the shares of common shares have been held for one year or less, assuming the
common  shares  are  a  capital  asset in the hands of the U.S. shareholder.  In
addition,  if we declare a distribution in October, November, or December of any
year  that is payable to a U.S. stockholder of record on a specified date in any
such  month,  such distribution shall be treated as both paid by us and received
by  the  U.S. stockholder on December 31 of such year, provided that we actually
pay  the  distribution  during  January  of  the  following  calendar  year.

     Shareholders  may not include in their individual income tax returns any of
our net operating losses or capital losses.  Instead, these losses are generally
carried  over  by  us  for  potential  offset against our future income. Taxable
distributions  from  us  and gain from the disposition of the common shares will
not be treated as passive activity income and, therefore, shareholders generally
will  not  be  able  to apply any "passive activity losses," such as losses from
certain  types  of  limited  partnerships  in which the shareholder is a limited
partner,  against  such  income.  In addition, taxable distributions from us and
gain  from  the  disposition  of  common  shares  generally  will  be treated as
investment  income for purposes of the investment interest limitations.  We will
notify  shareholders  after  the close of our taxable year as to the portions of
the  distributions  attributable  to  that year that constitute ordinary income,
return  of  capital  and  capital  gain.

TAXATION  OF  U.S.  SHAREHOLDERS  ON  THE  DISPOSITION  OF  COMMON  SHARES

     In general, a U.S. shareholder who is not a dealer in securities must treat
any gain or loss realized upon a taxable disposition of his or her common shares
as  long-term  capital  gain or loss if the U.S. shareholder has held the common
shares  for more than one year and otherwise as short-term capital gain or loss.
However,  a  U.S.  shareholder  must  treat  any loss upon a sale or exchange of
common  shares  held  by  such shareholder for six-months or less as a long-term
capital  loss  to  the  extent of capital gain dividends and other distributions
from  us  that such U.S. shareholder treats as long-term capital gain.  All or a
portion  of any loss that a U.S. shareholder realizes upon a taxable disposition
of  the  common shares may be disallowed if the U.S. shareholder purchases other
common  shares  within  30  days  before  or  after  the  disposition.

CAPITAL  GAINS  AND  LOSSES

     The  tax  rate  differential  between  capital gain and ordinary income for
non-corporate  taxpayers  may  be significant.  A taxpayer generally must hold a
capital  asset  for more than one year for gain or loss derived from its sale or
exchange  to be treated as long-term capital gain or loss.  The highest marginal
individual  income tax rate


                                       45

currently  is  35%. The maximum tax rate on long-term capital gain applicable to
most  domestic  non-corporate taxpayers currently is 15% for sales and exchanges
of assets held for more than one year. A 20% rate applies to sales and exchanges
of  capital  assets  after  December 31, 2008. The maximum tax rate on long-term
capital  gain  from  the  sale  or  exchange  of  "section  1250  property,"  or
depreciable  real  property, is 25% to the extent that such gain would have been
treated  as  ordinary  income if the property were "section 1245 property." With
respect  to  distributions  that  we designate as capital gain dividends and any
retained  capital  gain  that  we  are  deemed  to  distribute, we generally may
designate  whether  such  a  distribution  is  taxable  to  our  non-corporate
shareholders  at  a 15% or 25% rate. In addition, the characterization of income
as  capital  gain  or  ordinary  income  may affect the deductibility of capital
losses. A non-corporate taxpayer may deduct capital losses not offset by capital
gains  against its ordinary income only up to a maximum annual amount of $3,000.
A non-corporate taxpayer may carry forward unused capital losses indefinitely. A
corporate  taxpayer  must  pay tax on its net capital gain at ordinary corporate
rates.  A  corporate  taxpayer  can  deduct capital losses only to the extent of
capital  gains,  with  unused  losses being carried back three years and forward
five  years.

INFORMATION  REPORTING  REQUIREMENTS  AND  BACKUP  WITHHOLDING

     We  will report to our shareholders and to the Internal Revenue Service the
amount  of distributions we pay during each calendar year, and the amount of tax
we  withhold,  if any.  Under the backup withholding rules, a shareholder may be
subject  to  backup  withholding  at  a  rate  of  up  to  28%  with  respect to
distributions  unless  the  holder:

     -    is  a corporation or comes within certain other exempt categories and,
          when  required,  demonstrates  this  fact;  or

     -    provides  a taxpayer identification number, certifies as to no loss of
          exemption  from  backup  withholding,  and otherwise complies with the
          applicable  requirements  of  the  backup  withholding  rules.

     A  shareholder  who  does  not  provide  us  with  its  correct  taxpayer
identification  number  also may be subject to penalties imposed by the Internal
Revenue  Service.  Any  amount  paid  as  backup  withholding will be creditable
against the shareholder's income tax liability.  In addition, we may be required
to withhold a portion of capital gain distributions to any shareholders who fail
to  certify  their  non-foreign  status  to  us.  For a discussion of the backup
withholding  rules  as  applied  to  non-U.S.  shareholders.  See  "-Taxation of
Non-U.S.  Shareholders."

TAXATION  OF  TAX  EXEMPT  SHAREHOLDERS

     Tax-exempt  entities,  including  qualified  employee  pension  and  profit
sharing  trusts  and  individual  retirement accounts, generally are exempt from
federal  income  taxation.  However,  they  are  subject  to  taxation  on their
unrelated  business  taxable  income.  While  many  investments  in  real estate
generate  unrelated  business  taxable  income, the Internal Revenue Service has
issued  a  ruling  that dividend distributions from a REIT to an exempt employee
pension trust do not constitute unrelated business taxable income so long as the
exempt  employee  pension trust does not otherwise use the shares of the REIT in
an  unrelated  trade  or  business  of  the pension trust. Based on that ruling,
amounts  that  we  distribute  to  tax-exempt  shareholders generally should not
constitute  unrelated  business  taxable  income.  However,  if  a  tax-exempt
shareholder  were  to  finance  its  acquisition  of  common shares with debt, a
portion  of  the  income  that  it  receives  from us would constitute unrelated
business  taxable  income  pursuant  to  the  "debt-financed  property"  rules.
Furthermore, social clubs, voluntary employee benefit associations, supplemental
unemployment  benefit  trusts  and qualified group legal services plans that are
exempt from taxation under special provisions of the federal income tax laws are
subject  to  different  unrelated business taxable income rules, which generally
will  require  them  to  characterize distributions that they receive from us as
unrelated  business  taxable  income.  Finally,  in  certain  circumstances,  a
qualified  employee  pension  or profit sharing trust that owns more than 10% of
our  shares  must  treat  a  percentage  of  the  dividends  that it receives as
unrelated business taxable income.  Such percentage is equal to the gross income
we  derive  from  an  unrelated  trade  or  business, determined as if we were a
pension  trust,  divided  by our total gross income for the year in which we pay
the  dividends.  That  rule  applies to a pension trust holding more than 10% of
our  shares  only  if:


                                       46

     -    the  percentage  of our dividends that the tax-exempt trust must treat
          as  unrelated  business  taxable  income  is  at  least  5%;

     -    we  qualify  as  a  REIT  by  reason  of  the modification of the rule
          requiring  that  no more than 50% of our shares of beneficial interest
          be owned by five or fewer individuals that allows the beneficiaries of
          the  pension  trust  to be treated as holding our shares of beneficial
          interest  in  proportion  to  their actuarial interests in the pension
          trust;  and

     -    either

          -    one  pension  trust owns more than 25% of the value of our shares
               of  beneficial  interest;  or

          -    a group of pension trusts each individually holding more than 10%
               of  the  value  of our shares of beneficial interest collectively
               own  more  than  50%  of  the  value  of our shares of beneficial
               interest.

TAXATION  OF  NON-U.S.  SHAREHOLDERS

     The  rules  governing  U.S.  federal  income  taxation of nonresident alien
individuals,  foreign  corporations,  foreign  partnerships,  and  other foreign
shareholders  are complex. This section is only a summary of such rules. We urge
non-U.S.  shareholders to consult their own tax advisors to determine the impact
of  federal, state, and local income tax laws on ownership of the common shares,
including  any  reporting  requirements.

     A  non-U.S.  shareholder  that  receives  a  distribution  that  is  not
attributable  to gain from our sale or exchange of U.S. real property interests,
as  defined  below,  and  that we do not designate as a capital gain dividend or
retained  capital  gain will recognize ordinary income to the extent that we pay
the  distribution  out  of  our  current  or accumulated earnings and profits. A
withholding  tax equal to 30% of the gross amount of the distribution ordinarily
will  apply  unless  an  applicable  tax  treaty  reduces or eliminates the tax.
However, if a distribution is treated as effectively connected with the non-U.S.
shareholder's  conduct  of  a  U.S.  trade or business, the non-U.S. shareholder
generally will be subject to federal income tax on the distribution at graduated
rates,  in  the  same manner as U.S. shareholders are taxed on distributions and
also  may  be  subject  to the 30% branch profits tax in the case of a corporate
non-U.S.  shareholder. We plan to withhold U.S. income tax at the rate of 30% on
the  gross  amount  of  any  distribution  paid to a non-U.S. shareholder unless
either:

     -    a  lower treaty rate applies and the non-U.S. shareholder files an IRS
          Form  W-8BEN  evidencing eligibility for that reduced rate with us, or

     -    the  non-U.S.  shareholder  files  an IRS Form W-8ECI with us claiming
          that  the  distribution  is  effectively  connected  income.

     A  non-U.S.  shareholder  will not incur tax on a distribution in excess of
our  current  and  accumulated earnings and profits if the distribution does not
exceed  the  adjusted basis of its common shares. Instead, the distribution will
reduce the adjusted basis of those common shares. A non-U.S. shareholder will be
subject  to  tax on a distribution that exceeds both our current and accumulated
earnings  and  profits  and  the  adjusted  basis  of  its common shares, if the
non-U.S.  shareholder otherwise would be subject to tax on gain from the sale or
disposition  of  its  common  shares,  as  described below. Because we generally
cannot  determine  at  the  time  we  make  a  distribution  whether  or not the
distribution  will  exceed  our current and accumulated earnings and profits, we
normally  will withhold tax on the entire amount of any distribution at the same
rate  as  we  would  withhold on a dividend. However, a non-U.S. shareholder may
obtain  a  refund  of  amounts  that  we  withhold  if we later determine that a
distribution  in fact exceeded our current and accumulated earnings and profits.
We  must  withhold  10%  of  any  distribution  that  exceeds  our  current  and
accumulated  earnings  and profits. Consequently, although we intend to withhold
at  a  rate  of  30%  on  the  entire  amount  of any distribution to a non-U.S.
shareholder,  to  the extent that we do not do so, we will withhold at a rate of
10%  on  any  portion  of a distribution not subject to withholding at a rate of
30%.


                                       47

     For  any  year  in  which we qualify as a REIT, a non-U.S. shareholder will
incur  tax  on  distributions  that  are  attributable  to gain from our sale or
exchange  of  "U.S.  real  property  interests"  under special provisions of the
federal  income  tax  laws  known  as  "FIRPTA."  The  term  "U.S. real property
interests"  includes  interests  in  real property and shares in corporations at
least  50%  of  whose  assets  consist  of  interests  in real property during a
specified  period.  Under  those  rules,  a  non-U.S.  shareholder  is  taxed on
distributions attributable to gain from sales of U.S. real property interests as
if  the  gain  were  effectively  connected with a U.S. business of the non-U.S.
shareholder.  A non-U.S. shareholder thus would be taxed on this distribution at
the  normal  capital  gain  rates  applicable  to  U.S. shareholders, subject to
applicable  alternative minimum tax and a special alternative minimum tax in the
case  of  a  nonresident  alien individual. A non-U.S. corporate shareholder not
entitled  to  treaty  relief  or exemption also may be subject to the 30% branch
profits  tax  on  such  a distribution. We must withhold 35% of any distribution
that  we  could designate as a capital gain dividend. A non-U.S. shareholder may
receive  a  credit  against  its  tax  liability  for  the  amount  we withhold.

     A non-U.S. shareholder generally will not incur tax under FIRPTA as long as
at  all  times  non-U.S.  persons hold, directly or indirectly, less than 50% in
value  of our shares of beneficial interest. We cannot assure you that that test
will  be  met.  However,  a  non-U.S.  shareholder  that  owned,  actually  or
constructively,  5% or less of the common shares at all times during a specified
testing  period  will  not  incur  tax  under  FIRPTA  if  the common shares are
"regularly  traded"  on  an  established  securities  market. Because our common
shares  are  regularly  traded  on  an established securities market, a non-U.S.
shareholder  will  not incur tax under FIRPTA unless it owns more than 5% of the
common  shares.  If  the  gain on the sale of the common shares were taxed under
FIRPTA, a non-U.S. shareholder would be taxed on that gain in the same manner as
U.S.  shareholders  subject  to  applicable  alternative  minimum tax, a special
alternative  minimum  tax  in the case of nonresident alien individuals, and the
possible  application  of  the  30%  branch  profits tax in the case of non-U.S.
corporations.  Furthermore,  a  non-U.S. shareholder generally is not subject to
FIRPTA  if:

     -    the gain is effectively connected with the non-U.S. shareholder's U.S.
          trade  or  business,  in  which  case the non-U.S. shareholder will be
          subject  to  the  same  treatment as U.S. shareholders with respect to
          such  gain,  or

     -    the  non-U.S.  shareholder  is  a nonresident alien individual who was
          present  in  the U.S. for 183 days or more during the taxable year and
          has  a  "tax  home"  in  the United States, in which case the non-U.S.
          shareholder  will  incur  a  30%  tax  on  his  or  her capital gains.

TAX  ASPECTS  OF OUR INVESTMENTS IN OUR OPERATING PARTNERSHIP AND THE SUBSIDIARY
PARTNERSHIPS

     The  following  discussion  summarizes  certain  federal  income  tax
considerations applicable to our direct or indirect investments in our operating
partnership  and any subsidiary partnerships or limited liability companies that
we  form  or  acquire  (each individually a "Partnership" and, collectively, the
"Partnerships").  The  discussion  does not cover state or local tax laws or any
federal  tax  laws  other  than  income  tax  laws.

     Classification  as  Partnerships.  We are entitled to include in our income
our  distributive  share  of  each  Partnership's  income  and  to  deduct  our
distributive  share  of  each  Partnership's  losses only if such Partnership is
classified  for  federal income tax purposes as a partnership (or an entity that
is  disregarded for federal income tax purposes if the entity has only one owner
or  member)  rather  than  as  a  corporation  or  an  association  taxable as a
corporation.  An  unincorporated entity with at least two owners or members will
be classified as a partnership, rather than as a corporation, for federal income
tax  purposes  if  it:

     -    is treated as a partnership under the Treasury regulations relating to
          entity  classification  (the  "check-the-box  regulations");  and

     -    is  not  a  "publicly  traded"  partnership.

     Under the check-the-box regulations, an unincorporated entity with at least
two  owners  or  members  may  elect  to  be classified either as an association
taxable  as  a corporation or as a partnership.  If such an entity fails to make
an election, it generally will be treated as a partnership (or an entity that is
disregarded  for federal income tax


                                       48

purposes  if  the  entity  has  only one owner or member) for federal income tax
purposes. Each Partnership intends to be classified as a partnership for federal
income  tax  purposes  and  no  Partnership  will  elect  to  be  treated  as an
association  taxable  as  a  corporation  under  the  check-the-box regulations.

     A  publicly  traded partnership is a partnership whose interests are traded
on  an  established  securities  market  or  are readily tradable on a secondary
market  or  the  substantial  equivalent thereof.  A publicly traded partnership
will  not,  however,  be treated as a corporation for any taxable year if 90% or
more  of  the  partnership's  gross  income  for  such  year consists of certain
passive-type income, including real property rents, gains from the sale or other
disposition  of  real property, interest, and dividends (the "90% passive income
exception").  Treasury  regulations (the "PTP regulations") provide limited safe
harbors  from  the definition of a publicly traded partnership.  Pursuant to one
of  those  safe  harbors  (the  "private  placement  exclusion"), interests in a
partnership will not be treated as readily tradable on a secondary market or the
substantial  equivalent  thereof  if  (1)  all interests in the partnership were
issued  in a transaction or transactions that were not required to be registered
under  the  Securities Act of 1933, as amended, and (2) the partnership does not
have  more  than 100 partners at any time during the partnership's taxable year.
In  determining  the  number  of  partners  in a partnership, a person owning an
interest in a partnership, grantor trust, or S corporation that owns an interest
in  the  partnership  is  treated  as  a partner in such partnership only if (1)
substantially  all  of  the  value  of  the  owner's  interest  in the entity is
attributable  to the entity's direct or indirect interest in the partnership and
(2) a principal purpose of the use of the entity is to permit the partnership to
satisfy  the 100-partner limitation.  Each Partnership qualifies for the private
placement  exclusion.  We  have  not  requested, and do not intend to request, a
ruling  from  the  Internal  Revenue  Service  that  the  Partnerships  will  be
classified  as  partnerships  for  federal  income  tax  purposes.

     If  for any reason a Partnership were taxable as a corporation, rather than
as  a  partnership, for federal income tax purposes, we likely would not be able
to  qualify  as a REIT.  See "Federal Income Tax Consequences of Our Status as a
REIT-Requirements  for  Qualification-Income  Tests"  and  "-Requirements  for
Qualification-Asset  Tests."  In  addition, any change in a Partnership's status
for  tax  purposes  might  be treated as a taxable event, in which case we might
incur  tax liability without any related cash distribution.  See "Federal Income
Tax  Consequences  of  Our  Status  as  a  REIT-Requirements  for
Qualification-Distribution  Requirements."  Further,  items  of  income  and
deduction  of  such  Partnership would not pass through to its partners, and its
partners  would be treated as shareholders for tax purposes.  Consequently, such
Partnership  would  be  required to pay income tax at corporate rates on its net
income,  and distributions to its partners would constitute dividends that would
not  be  deductible  in  computing  such  Partnership's  taxable  income.

INCOME  TAXATION  OF  THE  PARTNERSHIPS  AND  THEIR  PARTNERS

     Partners,  Not  the  Partnerships,  Subject to Tax.  A partnership is not a
taxable entity for federal income tax purposes.  Rather, we are required to take
into  account  our  allocable share of each Partnership's income, gains, losses,
deductions,  and  credits for any taxable year of such Partnership ending within
or  with  our  taxable  year, without regard to whether we have received or will
receive  any  distribution  from  such  Partnership.

     Partnership  Allocations.  Although  a partnership agreement generally will
determine  the  allocation of income and losses among partners, such allocations
will  be  disregarded for tax purposes if they do not comply with the provisions
of  the  federal  income  tax  laws  governing  partnership  allocations.  If an
allocation  is  not recognized for federal income tax purposes, the item subject
to the allocation will be reallocated in accordance with the partners' interests
in  the  partnership, which will be determined by taking into account all of the
facts  and  circumstances  relating  to the economic arrangement of the partners
with  respect  to  such item.  Each Partnership's allocations of taxable income,
gain,  and  loss  are  intended  to  comply with the requirements of the federal
income  tax  laws  governing  partnership  allocations.

     Tax  Allocations  With  Respect  to  Contributed Properties.  Income, gain,
loss,  and deduction attributable to appreciated or depreciated property that is
contributed to a partnership in exchange for an interest in the partnership must
be  allocated in a manner such that the contributing partner is charged with, or
benefits  from,  respectively, the unrealized gain or unrealized loss associated
with  the  property  at  the  time  of  the  contribution.  The  amount  of such
unrealized  gain  or  unrealized  loss  ("built-in  gain" or "built-in loss") is
generally  equal  to  the  difference  between  the  fair  market  value  of the
contributed  property  at the time of contribution and the adjusted tax basis of
such  property  at  the  time  of  contribution (a "book-tax difference").  Such
allocations  are  solely  for  federal income tax purposes and


                                       49

do  not affect the book capital accounts or other economic or legal arrangements
among  the  partners.  The  U.S.  Treasury  Department  has  issued  regulations
requiring  partnerships  to  use a "reasonable method" for allocating items with
respect to which there is a book-tax difference and outlining several reasonable
allocation  methods.

     Under  our  operating  partnership's partnership agreement, depreciation or
amortization deductions of our operating partnership generally will be allocated
among  the  partners  in  accordance  with  their  respective  interests  in our
operating  partnership,  except  to the extent that our operating partnership is
required  under the federal income tax laws governing partnership allocations to
use  a  method  for  allocating  tax  depreciation  deductions  attributable  to
contributed properties that results in our receiving a disproportionate share of
such  deductions.  In  addition, gain or loss on the sale of a property that has
been  contributed,  in  whole  or  in part, to our operating partnership will be
specially  allocated  to the contributing partners to the extent of any built-in
gain  or  loss  with  respect  to such property for federal income tax purposes.

     Basis  in  Partnership Interest.  Our adjusted tax basis in our partnership
interest  in  our  operating  partnership  generally  is  equal  to:

     -    the  amount of cash and the basis of any other property contributed by
          us  to  our  operating  partnership;

     -    increased by our allocable share of our operating partnership's income
          and  our allocable share of indebtedness of our operating partnership;
          and

     -    reduced,  but  not below zero, by our allocable share of our operating
          partnership's  loss  and  the amount of cash distributed to us, and by
          constructive  distributions resulting from a reduction in our share of
          indebtedness  of  our  operating  partnership.

If  the allocation of our distributive share of our operating partnership's loss
would  reduce the adjusted tax basis of our partnership interest below zero, the
recognition  of such loss will be deferred until such time as the recognition of
such  loss  would  not  reduce our adjusted tax basis below zero.  To the extent
that  our operating partnership's distributions, or any decrease in our share of
the  indebtedness  of  our  operating  partnership,  which  is  considered  a
constructive  cash  distribution  to the partners, reduce our adjusted tax basis
below  zero,  such  distributions  will  constitute  taxable income to us.  Such
distributions  and  constructive distributions normally will be characterized as
long-term  capital  gain.

     Depreciation  Deductions  Available  to  Our Operating Partnership.  To the
extent  that our operating partnership acquired its hotels in exchange for cash,
its  initial  basis in such hotels for federal income tax purposes generally was
or  will  be equal to the purchase price paid by our operating partnership.  Our
operating  partnership  depreciates  such depreciable hotel property for federal
income  tax  purposes  under  the  modified  accelerated cost recovery system of
depreciation  ("MACRS").  Under  MACRS,  our  operating  partnership  generally
depreciates  furnishings and equipment over a seven-year recovery period using a
200%  declining  balance  method  and  a half-year convention.  If, however, our
operating  partnership  places more than 40% of its furnishings and equipment in
service  during  the  last  three  months  of  a  taxable  year,  a  mid-quarter
depreciation convention must be used for the furnishings and equipment placed in
service  during  that  year.  Recently  enacted  tax  legislation  provides  a
first-year  "bonus" depreciation deduction equal to 50% of the adjusted basis of
qualified property placed in service after May 5, 2003, which includes qualified
leasehold  improvement property and property with a recovery period of less than
20 years, such as furnishings and equipment at our hotels.  "Qualified leasehold
improvement  property"  generally  includes improvements made to the interior of
nonresidential  real  property  that are placed in service more than three years
after  the  date the building was placed in service.  Under MACRS, our operating
partnership  generally  depreciates  buildings  and  improvements over a 39-year
recovery  period  using  a straight line method and a mid-month convention.  Our
operating  partnership's  initial basis in hotels acquired in exchange for units
in  our  operating  partnership  should be the same as the transferor's basis in
such  hotels  on the date of acquisition by our operating partnership.  Although
the  law  is not entirely clear, our operating partnership generally depreciates
such  depreciable  hotel  property for federal income tax purposes over the same
remaining  useful lives and under the same methods used by the transferors.  Our
operating  partnership's  tax  depreciation  deductions  are allocated among the
partners  in  accordance  with  their  respective  interests  in  our  operating
partnership,  except  to  the  extent that our operating partnership is required
under  the  federal  income  tax laws governing partnership allocations to use a
method  for


                                       50

allocating  tax  depreciation  deductions attributable to contributed properties
that  results  in  our  receiving  a  disproportionate share of such deductions.

SALE  OF  A  PARTNERSHIP'S  PROPERTY

     Generally,  any gain realized by a Partnership on the sale of property held
by the Partnership for more than one year will be long-term capital gain, except
for  any  portion  of such gain that is treated as depreciation or cost recovery
recapture.  Any  gain  or loss recognized by a Partnership on the disposition of
contributed  properties  will  be  allocated  first  to  the  partners  of  the
Partnership who contributed such properties to the extent of their built-in gain
or  loss  on  those  properties  for federal income tax purposes.  The partners'
built-in  gain  or loss on such contributed properties will equal the difference
between  the partners' proportionate share of the book value of those properties
and  the  partners'  tax  basis allocable to those properties at the time of the
contribution.  Any  remaining  gain or loss recognized by the Partnership on the
disposition  of  the  contributed properties, and any gain or loss recognized by
the  Partnership  on  the disposition of the other properties, will be allocated
among  the  partners in accordance with their respective percentage interests in
the  Partnership.

     Our share of any gain realized by a Partnership on the sale of any property
held  by  the Partnership as inventory or other property held primarily for sale
to  customers in the ordinary course of the Partnership's trade or business will
be  treated  as  income  from a prohibited transaction that is subject to a 100%
penalty tax.  Such prohibited transaction income also may have an adverse effect
upon  our  ability  to  satisfy  the income tests for REIT status.  See "Federal
Income  Tax  Consequences  of  Our  Status  as  a  REIT-Requirements  for
Qualification-Income  Tests." We, however, do not presently intend to acquire or
hold or to allow any Partnership to acquire or hold any property that represents
inventory or other property held primarily for sale to customers in the ordinary
course  of  our  or  such  Partnership's  trade  or  business.

STATE  AND  LOCAL  TAXES

     We  and/or you may be subject to taxation by various states and localities,
including  those  in which we or a shareholder transacts business, owns property
or  resides.  The  state  and  local  tax  treatment may differ from the federal
income  tax  treatment  described above.  Consequently, you should consult their
own  tax  advisors  regarding  the  effect  of  state and local tax laws upon an
investment  in  our  common  shares.



                                       51

                              PLAN OF DISTRIBUTION

     This prospectus covers the resale of shares of common shares by CNL and its
pledgees, donees, assignees and other successors in interest.  The common shares
offered  by  CNL  may  be issued to it by us upon exchange of Series A preferred
units  in  our  operating partnership.  These common shares may be issued to CNL
pursuant to an exemption from the registration provisions of the Securities Act.
We are registering the common shares to which this prospectus relates to provide
CNL  with  freely tradable securities, but registration of these shares does not
necessarily  mean  that  any  of these shares will be issued by us or offered or
sold  by  CNL.  CNL may sell its common shares on the American Stock Exchange or
through  any  other  facility  on  which  the  shares  are traded, or in private
transactions.  These sales may be at market prices or at negotiated prices.  CNL
may  use  the  following  methods  when  selling  common  shares:

     -    ordinary  brokerage  transactions and transactions in which the broker
          or  dealer  solicits  purchasers;

     -    block trades in which the broker or dealer attempts to sell the common
          shares as agent, but may position and resell a portion of the block as
          principal  to  facilitate  the  transaction;

     -    purchases  by a broker or dealer as principal and resale by the broker
          or  dealer  for  its  account  pursuant  to  this  prospectus;

     -    privately  negotiated  transactions;

     -    any  combination  of  these  methods  of  sale;  or

     -    any  other  legal  method.

     CNL  may  engage  in  short  sales  of the common shares and deliver common
shares  to close out their short positions.  CNL may also enter into put or call
options  or  other  transactions  with  broker-dealers  or  others which require
delivery  to  those  persons  of  common  shares  covered  by  this  prospectus.

     Brokers,  dealers  or other agents participating in the distribution of the
common  shares  may receive compensation in the form of discounts or commissions
from  CNL, as well as the purchaser if they act as agent for the purchaser.  The
discount  or  commission  in  a  particular  transaction  could be more than the
customary  amount.  We  know  of  no  existing  arrangements between CNL and any
underwriter, broker, dealer or agent relating to the sale or distribution of the
common  shares.

     CNL  and  any brokers or dealers that participate in the sale of the common
shares  may  be deemed to be "underwriters" within the meaning of the Securities
Act.  Any discounts, commissions or other compensation received by these persons
and any profit on the resale of the common shares by them as principals might be
deemed to be underwriters' compensation.  CNL may agree to indemnify any broker,
dealer  or  agent  that  participates  in  the sale of the common shares against
various  liabilities, including liabilities under the Securities Act of 1933, as
amended.

     To  the  extent  required  by law, at the time a particular offer of common
shares  is  made,  we will file a supplement to this prospectus which identifies
the  number of common shares being offered, the name of any participating broker
or  dealer,  the  amount  of  discounts  and commissions, and any other material
information.

     CNL and any other person participating in a distribution will be subject to
the  applicable  provisions  of  the Exchange Act and its rules and regulations.
For  example,  the  anti-manipulative  provisions  of Regulation M may limit the
ability  of  CNL  or  others  to  engage  in stabilizing and other market making
activities.

     This  offering  will  terminate  upon  the  earlier  of:

     -    the  date  that  all of the common shares under this prospectus may be
          sold  in accordance with Rule 144 under the Securities Act of 1933, as
          amended;  or


                                       52

     -    the  date  on  which  all shares offered hereby have been sold by CNL.

     CNL  may also sell the common shares from time to time pursuant to Rule 144
under  the  Securities  Act, rather than pursuant to this prospectus, so long as
they  meet  the  criteria  and  conform  to  the  requirements  of  the  rule.

     We  will not receive any of the proceeds from the sale of the common shares
by  CNL.  We  will  pay  the registration and other offering expenses related to
this  offering,  but  CNL  will  pay  all  underwriting  discounts and brokerage
commissions  incurred  in  connection  with  the  offering.  We  have  agreed to
indemnify  CNL  against  various  liabilities,  including  liabilities under the
Securities  Act.

     In  order  to  comply with some states' securities laws, if applicable, the
common  shares  will be sold in those states only through registered or licensed
brokers  or  dealers.  In  addition, in some states the common shares may not be
sold unless they have been registered or qualified for sale or an exemption from
registration  or  qualification  is  available  and  is  satisfied.

                                     EXPERTS

     Our  consolidated  balance  sheets as of December 31, 2002 and 2001 and our
consolidated  statements  of operations, cash flows and shareholders' equity for
each  of  the  years  ended  December  31,  2002,  2001 and 2000 incorporated by
reference  in  this  prospectus,  have  been  audited  by  Moore Stephens, P.C.,
independent  certified  public  accountants,  whose  reports are incorporated by
reference  in  this  prospectus  and  given  upon  their authority as experts in
accounting  and auditing.  The consolidated balance sheets of Hersha Hospitality
Management  L.P. as of December 31, 2002 and 2001, and the related statements of
operations, partners' capital, and cash flows for each of the three years in the
period  ended  December  31,  2002, incorporated by reference in this prospectus
have  been  audited  by  Moore  Stephens,  P.C.,  independent  certified  public
accountants,  whose reports are incorporated by reference in this prospectus and
given  upon  their  authority  as  experts  in  accounting  and  auditing.

                                  LEGAL MATTERS

     Certain  legal matters in connection with this offering will be passed upon
for  us  by  Hunton  &  Williams LLP.  In addition, the summary of legal matters
contained  in  the  section of this Prospectus under the heading "Federal Income
Tax  Consequences  of  Our Status as a REIT" is based on the opinion of Hunton &
Williams  LLP.




                                       53

                                     PART II
                     INFORMATION NOT REQUIRED IN PROSPECTUS

ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.

     The  following  table  sets  forth  the  costs  and  expense,  other  than
underwriting  discounts and commissions, payable by the Registrant in connection
with  the  sale  of the securities being registered.  All amounts are estimates.



                                                           AMOUNT TO BE PAID
                                                           ------------------
                                                        

   SEC registration fee                                    $            3,954
   Printing and mailing expenses                           $                0
   Legal fees and expenses*                                $           20,000
   Accounting fees and expenses*                           $           10,000
   Transfer agent and custodian fees*                      $                0
   Miscellaneous                                           $            6,046
                                                           ------------------
   Total                                                   $           40,000
                                                           ==================

*Estimated


ITEM 15. INDEMNIFICATION OF OFFICERS AND DIRECTORS.

     The  Declaration  of  Trust  and  Bylaws of the Registrant provide that the
Registrant  shall indemnify its directors, officers and certain other parties to
the  fullest  extent  permitted  from  time  to  time  by  the  Maryland General
Corporation  Law  (the "MGCL").  The MGCL permits a corporation to indemnify its
directors,  officers  and  certain  other  parties against judgments, penalties,
fines,  settlements  and  reasonable  expenses  actually  incurred  by  them  in
connection  with  any  proceeding to which they may be made a party by reason of
their  service  to or at the request of the Registrant, unless it is established
that  the  act  or  omission of the indemnified party was material to the matter
giving  rise  to the proceeding and (i) the act or omission was committed in bad
faith or was the result of active and deliberate dishonesty, or (ii) in the case
of  any  criminal  proceeding,  the  indemnified  party  had reasonable cause to
believe  that  the  act  or  omission  was  unlawful.

     Maryland  law permits a Maryland real estate investment trust to include in
its  Declaration of Trust a provision limiting the liability of its trustees and
officers  to  the  trust  and  its  shareholders  for  money  damages except for
liability  resulting from (a) actual receipt of an improper benefit or profit in
money,  property or services or (b) active and deliberate dishonesty established
by  a  final  judgment  and  which  is  material  to  the  cause of action.  Our
Declaration  of  Trust  contains such a provision which eliminates trustees' and
officers'  liability  to  the  maximum  extent  permitted  by  Maryland  law.

     Our  Declaration of Trust authorizes us, to the maximum extent permitted by
Maryland  law,  to  indemnify  any  present  or former trustee or officer or any
individual  who,  while  a trustee of the Trust and at the request of the Trust,
serves  or  has served another trust, real estate investment trust, partnership,
joint  venture,  trust,  employee  benefit  plan  or  any  other enterprise as a
trustee, officer, partner or trustee, from and against any claim or liability to
which that person may become subject or which that person may incur by reason of
his  or her status as a present or former trustee or officer of the Trust and to
pay  or reimburse their reasonable expenses in advance of final disposition of a
proceeding.  Our Bylaws obligate us, to the maximum extent permitted by Maryland
law,  to  indemnify  any  present or former trustee or officer or any individual
who, while a trustee of the Trust and at the request of the Trust, serves or has
served  another  corporation,  real  estate investment trust, partnership, joint
venture, trust, employee benefit plan or other enterprise as a trustee, officer,
partner  or  trustee  and who is made a party to the proceeding by reason of his
service  in  that capacity from and against any claim or liability to which that
person may become subject or which that person may incur by reason of his or her
status  as  a  present  or  former trustee or officer of the Trust and to pay or
reimburse  their  reasonable  expenses  in  advance  of  final  disposition of a
proceeding.  The  Declaration  of  Trust  and  Bylaws  also  permit the Trust to
indemnify  and  advance  expenses  to any person who served a predecessor of the
Trust  in any of the capacities described above and any employee or agent of the
Trust  or  a  predecessor  of  the  Trust.


                                      II-1

     Maryland  law  permits a Maryland real estate investment trust to indemnify
and advance expenses to its trustees, officers, employees and agents to the same
extent  as  permitted  for  directors  and  officers  of  Maryland corporations.
Maryland law permits a corporation to indemnify its present and former directors
and officers, among others, against judgments, penalties, fines, settlements and
reasonable  expenses actually incurred by them in connection with any proceeding
to  which  they may be made a party by reason of their service in those or other
capacities unless it is established that (a) the act or omission of the director
or  officer was material to the matter giving rise to the proceeding and (i) was
committed  in  bad  faith  or  (ii)  was  the  result  of  active and deliberate
dishonesty,  (b)  the director or officer actually received an improper personal
benefit  in  money,  property  or  services  or  (c) in the case of any criminal
proceeding, the director or officer had reasonable cause to believe that the act
or  omission  was unlawful.  However, under Maryland law, a Maryland corporation
may  not  indemnify  for an adverse judgment in a suit by or in the right of the
corporation  or  for  a judgment of liability on the basis that personal benefit
was  improperly  received,  unless in either case a court orders indemnification
and then only for expenses.  In accordance with Maryland law, our Bylaws require
us, as a condition to advancing expenses, to obtain (a) a written affirmation by
the  trustee or officer of his good faith belief that he has met the standard of
conduct necessary for indemnification and (b) a written undertaking by him or on
his behalf to repay the amount paid or reimbursed if it is ultimately determined
that  the  standard  of  conduct  was  not  met.

ITEM  16.  EXHIBITS.



     (a)     Financial Statements included in the prospectus.

     (b)     Exhibits

         
     3.1     Amended and Restated Declaration of Trust of the Registrant.**
     3.2     Articles Supplementary of Hersha Hospitality Trust which classify and designate 350,000
             preferred shares of beneficial interest as Series A Preferred Shares of beneficial interest, par
             value $.01 per share  (filed as Exhibit 3.1 to the Form 8-K filed on April 23, 2003 (SEC File No.
             001-14765))
     3.3     Bylaws of the Registrant.*
     4.1     Form of Common Share Certificate*
     4.2     Excepted Holder Agreement, dated April 21, 2003, by and among CNL Hospitality Properties,
             Inc., CNL Hospitality Partners, L.P., Hersha Hospitality Trust and Hersha Hospitality Limited
             Partnership  (filed as Exhibit 4.1 to the Form 8-K filed on April 23, 2003 (SEC File No.  001-
             14765))
     5.1     Opinion of Hunton & Williams LLP***
     8.1     Opinion of Hunton & Williams LLP with respect to tax matters***
     10.1    Amended and Restated Agreement of Limited Partnership of Hersha Hospitality Limited
             Partnership*
     10.2    Option Agreement dated as of June 3, 1998, among Hasu P.  Shah, Jay H.  Shah, Neil H, Shah,
             Bharat C.  Mehta, K.D.  Patel, Rajendra O.  Gandhi, Kiran P.  Patel, David L.  Desfor,
             Madhusudan I.  Patni and Manhar Gandhi, and the Partnership*
     10.3    Amendment to Option Agreement dated December 4, 1998*
     10.4    Contribution Agreement, dated June 3, 1998, between Shree Associates, Devi Associates,
             Shreeji Associates, Madhusudan I.  Patni and Shreenathji Enterprises, Ltd., as Contributor, and
             Hersha Hospitality Limited Partnership, as Acquiror*
     10.5    Contribution Agreement, dated June 3, 1998, between Shree Associates, as Contributor, and
             Hersha Hospitality Limited Partnership, as Acquiror*
     10.6    Purchase Leaseback Agreement entered into as of May 19, 2000 between Hersha Hospitality
             Limited Partnership and each of Noble Investments Newnan, LLC, Millennium Two
             Investments Duluth, LLC, Noble Investments RMD, LLC and Embassy Investments Duluth,
             LLC, entities owned by Noble Investment Group, Ltd.  (incorporated by reference to Exhibit
             10.1 to the Company's Current Report on Form 8-K filed on June 5, 2000)
     10.7    Form of Percentage Lease*
     10.8    Administrative Services Agreement, dated January 26, 1999, between Hersha Hospitality Trust
             and Hersha Hospitality Management, L.P.*


                                      II-2

     10.9    Purchase Agreement, dated December 4, 2001, between Metro Two Hotel, LLC, as Seller, and
             HHLP Hunters Point, LLC, as Purchaser (incorporated by reference to Exhibit 10.1 to the
             Company's Current Report on Form 8-K filed on December 7, 2001)
     10.10   Securities Purchase Agreement, dated as of April 21, 2003, among CNL Hospitality Partners,
             L.P., Hersha Hospitality Trust and Hersha Hospitality Limited Partners  (filed as Exhibit 10.1 to
             the Form 8-K filed on April 23, 2003 (SEC File No.  001-14765))
     10.11   Second Amendment to the Amended and Restated Agreement of Limited Partnership of Hersha
             Hospitality Limited Partnership, dated as of April 21, 2003  (filed as Exhibit 10.2 to the Form 8-
             K filed on April 23, 2003 (SEC File No.  001-14765))
     10.12   Standstill Agreement, dated as of April 21, 2003, by and among Hersha Hospitality Trust,
             Hersha Hospitality Limited Partnership, CNL Hospitality Partners, L.P.  and CNL Financial
             Group, Inc.  (filed as Exhibit 10.3 to the Form 8-K filed on April 23, 2003 (SEC File No.  001-
             14765))
     10.13   Registration Rights Agreement, dated April 21, 2003, between CNL Hospitality Partners, L.P.
             and Hersha Hospitality Trust  (filed as Exhibit 10.4 to the Form 8-K filed on April 23, 2003
             (SEC File No.  001-14765))
     10.14   Limited Partnership Agreement of HT/CNL Metro Hotels, LP, dated as of April 21, 2003  (filed
             as Exhibit 10.5 to the Form 8-K filed on April 23, 2003 (SEC File No.  001-14765))
     10.15   Second Amendment to Option Agreement (filed as Exhibit 10.15 to the Registration Statement
             on Form S-3 filed on February 24, 2004 (File No. 333-113061)).
     21      List of Subsidiaries of the Registrant***
     23.1    Consent of Moore Stephens, P.C.***
     23.2    Consent of Hunton & Williams LLP (included in Exhibit 5.1)
     24      Power of Attorney (included on signature page of the Registration Statement)


*    Filed with the SEC as an exhibit to Hersha Hospitality Trust's registration statement on Form S-11,
     as  amended,  Registration  No.  333-56087, and incorporated  herein  by  reference.

**   Filed with the SEC as an exhibit to the registration statement on Form S-2, Registration No. 333-109100,
     filed on September 25, 2003, and incorporated herein  by  reference.

***  Filed  herewith.


ITEM 17. UNDERTAKINGS.

     The  undersigned  Registrant  hereby  undertakes:

     (a)     To file, during any period in which offers or sales are being made,
a  post-effective  amendment  to  this  registration  statement:

          (i)  To  include  any  prospectus  required by Section 10(a)(3) of the
               Securities  Act  of  1933;

          (ii) To  reflect  in  the prospectus any facts or events arising after
               the  effective  date  of  the registration statement (or the most
               recent  post- effective amendment thereof) which, individually or
               in  the  aggregate,  represent  a  fundamental  change  in  the
               information  set  forth  in  the  registration  statement.
               Notwithstanding the foregoing, any increase or decrease in volume
               of  securities  offered  (if the total dollar value of securities
               offered  would  not  exceed  that  which  was registered) and any
               deviation  from  the  low  or  high  end of the estimated maximum
               offering  range  may be reflected in the form of prospectus filed
               with the Commission pursuant to Rule 424(b) if, in the aggregate,
               the  changes  in  volume  and  price  represent no more than a 20
               percent  change in the maximum aggregate offering price set forth
               in  the  "Calculation of Registration Fee" table in the effective
               registration  statement;  and


                                      II-3

          (iii)  To include any material information with respect to the plan of
               distribution  not  previously  disclosed  in  the  registration
               statement  or  any  material  change  to such information in this
               registration  statement;

provided,  however,  that  paragraphs  (a)(i)  and  (a)(ii)  do not apply if the
information  required  to  be  included  in  a post-effective amendment by those
paragraphs  is contained in periodic reports filed by the registrant pursuant to
Section 13 or Section 15(d) of the Securities Exchange Act that are incorporated
by  reference  in  the  registration  statement.

     (b)     That,  for  the  purpose  of  determining  any  liability under the
Securities Act of 1933, each such post-effective amendment shall be deemed to be
a new registration statement relating to the securities offered therein, and the
offering  of such securities at that time shall be deemed to be the initial bona
fide  offering  thereof.

     (c)     To  remove from registration by means of a post-effective amendment
any of the securities being registered which remain unsold at the termination of
the  offering.

     (d)     That,  for  purposes  of  determining  any  liability  under  the
Securities  Act  of 1933, each filing of the Registrant's annual report pursuant
to  Section  13(a) or Section 15(d) of the Securities Exchange Act of 1934 (and,
where  applicable,  each  filing  of  an  employee  benefit plan's annual report
pursuant  to  Section  15(d)  of  the  Securities  Exchange Act of 1934) that is
incorporated  by reference in the registration statement shall be deemed to be a
new  registration  statement relating to the securities offered therein, and the
offering  of such securities at that time shall be deemed to be the initial bona
fide  offering  thereof.

     (e)     To  file  an  application  for  the  purpose  of  determining  the
eligibility  of  the  trustee  to act under subsection (a) of Section 310 of the
Trust  Indenture  Act in accordance with the rules and regulations prescribed by
the  Commission  under  Section  305(b)(2)  of  the  Act.

     Insofar as indemnification for liabilities arising under the Securities Act
of  1933  may be permitted to directors, officers and controlling persons of the
Registrant  pursuant  to  the foregoing provisions, or otherwise, the Registrant
has  been  advised that in the opinion of the Securities and Exchange Commission
such  indemnification  is  against public policy as expressed in the Act and is,
therefore, unenforceable.  In the event that a claim for indemnification against
such  liabilities (other than the payment by the Registrant of expenses incurred
or  paid  by  a director, officer or controlling person of the Registrant in the
successful  defense  of  any  action,  suit  or  proceeding) is asserted by such
director,  officer or controlling person in connection with the securities being
registered, the Registrant will, unless in the opinion of its counsel the matter
has  been  settled  by  controlling  precedent, submit to a court of appropriate
jurisdiction  the  question whether such indemnification by it is against public
policy as expressed in the Act and will be governed by the final adjudication of
such  issue.




                                      II-4

                                   SIGNATURES

     Pursuant  to the requirements of the Securities Act of 1933, the registrant
certifies  that  it  has  reasonable grounds to believe that it meets all of the
requirements  for  filing  on  Form S-3 and has duly caused to this registration
statement  to  be  signed  on  its  behalf  by  the  undersigned, thereunto duly
authorized,  in  the  City of New Cumberland, State of Pennsylvania, on February
27,  2004.

                                          HERSHA HOSPITALITY TRUST

                                          (Registrant)




                                          By:  /s/  Hasu P. Shah
                                               -------------------------------
                                               Hasu P. Shah
                                               Chief Executive Officer



                                POWER OF ATTORNEY

     Pursuant  to  the  requirements  of  the  Securities  Act  of  1933,  this
registration  statement  has  been  signed  by  the  following  persons  in  the
capacities  indicated  on  February  27,  2004.  Each  of  the  directors and/or
officers  of  Hersha  Hospitality  Trust  whose  signature  appears below hereby
appoints  each  of  Jay H. Shah and Ashish R. Parikh, as his attorney-in-fact to
sign  in his name and behalf, in any and all capacities stated below and to file
with  the  Securities and Exchange Commission, any and all amendments, including
post-effective amendments to this registration statement, making such changes in
the  registration  statement as appropriate, and generally to do all such things
in  their  behalf in their capacities as officers and directors to enable Hersha
Hospitality  Trust  to comply with the provisions of the Securities Act of 1933,
and  all  requirements  of  the  Securities  and  Exchange  Commission.



            SIGNATURE                                TITLE
            ---------                                -----
                                 


/s/ Hasu P. Shah                    Chairman, Chief Executive Officer and Trustee
---------------------------------   (Principal Executive Officer)
Hasu P. Shah


/s/ Jay H. Shah                     President and Chief Operating Officer
---------------------------------
Jay H.  Shah


/s/ Ashish R. Parikh                Chief Financial Officer
---------------------------------   (Principal Financial and Accounting Officer)
Ashish R.  Parikh


/s/ K.D. Patel                      Trustee
---------------------------------
K.D.  Patel


/s/ John M. Sabin                   Trustee
---------------------------------
John M.  Sabin


/s/ Michael A. Leven                Trustee
---------------------------------
Michael A.  Leven


/s/ William Lehr, Jr.               Trustee
---------------------------------
William Lehr, Jr.


/s/ Thomas S. Capello               Trustee
---------------------------------
Thomas S.  Capello


/s/ Donald J. Landry                Trustee
---------------------------------
Donald J.  Landry



                                      II-5



                                                      EXHIBIT INDEX
          
        3.1  Amended and Restated Declaration of Trust of the Registrant.**
        3.2  Articles Supplementary of Hersha Hospitality Trust which classify and designate 350,000 preferred
             shares of beneficial interest as Series A Preferred Shares of beneficial interest, par value $.01 per share
             (filed as Exhibit 3.1 to the Form 8-K filed on April 23, 2003 (SEC File No.  001-14765))
        3.3  Bylaws of the Registrant.*
        4.1  Form of Common Share Certificate*
        4.2  Excepted Holder Agreement, dated April 21, 2003, by and among CNL Hospitality Properties, Inc.,
             CNL Hospitality Partners, L.P., Hersha Hospitality Trust and Hersha Hospitality Limited Partnership
             (filed as Exhibit 4.1 to the Form 8-K filed on April 23, 2003 (SEC File No.  001-14765))
        5.1  Opinion of Hunton & Williams LLP***
        8.1  Opinion of Hunton & Williams LLP with respect to tax matters***
       10.1  Amended and Restated Agreement of Limited Partnership of Hersha Hospitality Limited Partnership*
       10.2  Option Agreement dated as of June 3, 1998, among Hasu P.  Shah, Jay H.  Shah, Neil H, Shah, Bharat
             C.  Mehta, K.D.  Patel, Rajendra O.  Gandhi, Kiran P.  Patel, David L.  Desfor, Madhusudan I.  Patni
             and Manhar Gandhi, and the Partnership*
       10.3  Amendment to Option Agreement dated December 4, 1998*
       10.4  Contribution Agreement, dated June 3, 1998, between Shree Associates, Devi Associates, Shreeji
             Associates, Madhusudan I.  Patni and Shreenathji Enterprises, Ltd., as Contributor, and Hersha
             Hospitality Limited Partnership, as Acquiror*
       10.5  Contribution Agreement, dated June 3, 1998, between Shree Associates, as Contributor, and Hersha
             Hospitality Limited Partnership, as Acquiror*
       10.6  Purchase Leaseback Agreement entered into as of May 19, 2000 between Hersha Hospitality Limited
             Partnership and each of Noble Investments Newnan, LLC, Millennium Two Investments Duluth, LLC,
             Noble Investments RMD, LLC and Embassy Investments Duluth, LLC, entities owned by Noble
             Investment Group, Ltd.  (incorporated by reference to Exhibit 10.1 to the Company's Current Report on
             Form 8-K filed on June 5, 2000)
       10.7  Form of Percentage Lease*
       10.8  Administrative Services Agreement, dated January 26, 1999, between Hersha Hospitality Trust and
             Hersha Hospitality Management, L.P.*
       10.9  Purchase Agreement, dated December 4, 2001, between Metro Two Hotel, LLC, as Seller, and HHLP
             Hunters Point, LLC, as Purchaser (incorporated by reference to Exhibit 10.1 to the Company's Current
             Report on Form 8-K filed on December 7, 2001)
      10.10  Securities Purchase Agreement, dated as of April 21, 2003, among CNL Hospitality Partners, L.P.,
             Hersha Hospitality Trust and Hersha Hospitality Limited Partners  (filed as Exhibit 10.1 to the Form 8-
             K filed on April 23, 2003 (SEC File No.  001-14765))
      10.11  Second Amendment to the Amended and Restated Agreement of Limited Partnership of Hersha
             Hospitality Limited Partnership, dated as of April 21, 2003  (filed as Exhibit 10.2 to the Form 8-K filed
             on April 23, 2003 (SEC File No.  001-14765))
      10.12  Standstill Agreement, dated as of April 21, 2003, by and among Hersha Hospitality Trust, Hersha
             Hospitality Limited Partnership, CNL Hospitality Partners, L.P.  and CNL Financial Group, Inc.  (filed
             as Exhibit 10.3 to the Form 8-K filed on April 23, 2003 (SEC File No.  001-14765))
      10.13  Registration Rights Agreement, dated April 21, 2003, between CNL Hospitality Partners, L.P.  and
             Hersha Hospitality Trust  (filed as Exhibit 10.4 to the Form 8-K filed on April 23, 2003 (SEC File No.
             001-14765))
      10.14  Limited Partnership Agreement of HT/CNL Metro Hotels, LP, dated as of April 21, 2003  (filed as
             Exhibit 10.5 to the Form 8-K filed on April 23, 2003 (SEC File No.  001-14765))
      10.15  Second Amendment to Option Agreement (filed as Exhibit 10.15 to the Registration Statement on Form
             S-3 filed on February 24, 2004 (File No. 333-113061)).
         21  List of Subsidiaries of the Registrant***
       23.1  Consent of Moore Stephens, P.C.***
       23.2  Consent of Hunton & Williams LLP (included in Exhibit 5.1)
         24  Power of Attorney (included on signature page of the Registration Statement)


                                      II-1



     *    Filed with the SEC as an exhibit to Hersha Hospitality Trust's registration statement on Form S-11, as
          amended, Registration No. 333-56087, and incorporated herein by reference.

     **   Filed with the SEC as an exhibit to the registration statement on Form S-2, Registration No. 333-109100,
          filed on September 25, 2003, and incorporated herein by reference.

     ***  Filed herewith.






                                      II-2