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                      SECURITIES AND EXCHANGE COMMISSION
                            WASHINGTON, D.C.  20549

                                 ___________

                                   FORM 8-K
            CURRENT REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
                       SECURITIES EXCHANGE ACT OF 1934

                     DECEMBER 24, 1996 (OCTOBER 17, 1996)
              (Date of Report (date of earliest event reported))

                               HFS INCORPORATED
            (Exact name of Registrant as specified in its charter)

               DELAWARE              1-11402          22-3059335
          (State or other          (Commission    (I.R.S. Employer
          jurisdiction of            File No.)     Identification
          incorporation or                              Number)
           organization)

            6 SYLVAN WAY
          PARSIPPANY, NEW JERSEY                         07054
          (Address of principal                        (Zip Code)
            executive office)

                                (201) 428-9700
             (Registrant's telephone number, including area code)

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          Item 5.  Other Events

          A.   ACQUISITIONS

               In October and November, 1996, HFS Incorporated
          ("HFS" or the Company") completed two significant
          acquisitions, which are described below.

          i)   THE AVIS ACQUISITION

          GENERAL

               On October 17, 1996, the Company completed the
          acquisition (the "Avis Acquisition") of all of the
          outstanding capital stock of Avis, Inc. ("Avis"),
          including payments under certain employee stock plans of
          Avis and the redemption of certain series of preferred
          stock of Avis, for approximately $800 million. 

               Avis, together with its subsidiaries, licensees and
          affiliates, operates the Avis System, which the Company
          believes to be the second largest car rental system in
          the world.  The Avis System consists of over
          approximately 4,139 locations, including locations at
          most major airports as well as downtown locations in
          major cities in the United States and in approximately
          149 countries and territories.  Approximately 84% of the
          Avis System rental revenues in the United States are
          received from locations operated by Avis directly or
          under agency arrangements, with the remainder being
          received from locations operated by independent
          licensees.  Avis's international business is conducted by
          a network of several wholly owned subsidiaries and joint
          ventures along with a number of licensees and
          sublicensees.  The Avis System in Europe, Africa and the
          Middle East is operated by Avis Europe, which is
          approximately 9% owned by Avis.  The Avis System in
          Canada, Latin America, the Caribbean and Asia Pacific,
          comprising some 65 countries and territories, is operated
          by Avis subsidiaries, joint ventures and licensees. 
          During the peak summer season, the Avis System fleet
          worldwide consists of more than approximately 386,548
          vehicles representing the following allocations of
          vehicles throughout the system: (i) 189,616 in the Avis
          U.S. Corporate fleet; (ii) 44,000 vehicles in the Avis
          International fleet; (iii) 50,932 in the Avis U.S.
          Licensee fleet; and (iv) 102,000 in the Avis Europe
          fleet.

               In the United States, Avis's principal rental base
          is business travelers who use the Avis System under
          contractual arrangements between Avis and their
          employers.  Because business travel normally is heaviest
          between Monday and Thursday of each week, Avis's
          concentration on serving business travelers has led to
          excess fleet capacity from Friday through Sunday of most
          weeks.

               Following the acquisition of Avis, the Company
          currently intends to dispose of a majority interest in
          the corporation which owns all company owned Avis car
          rental locations (the "Operating Company") through an
          initial public offering of the common stock of the
          Operating Company during 1997.  It is expected that the
          Operating Company would operate under a license from Avis
          pursuant to which the Operating Company would pay Avis a
          royalty based upon the revenue of the Operating Company. 
          The Company expects that the acquisition of Avis will
          also provide further opportunities to expand the
          Company's preferred vendor program.

          CAR RENTAL INDUSTRY OVERVIEW

               The car rental industry provides car and truck
          rentals to business and individual customers worldwide. 
          The industry has been composed of two principal segments:
          general use (mainly at airport and downtown locations)
          and local/replacement (mainly at downtown and suburban
          locations).  The car rental industry rents primarily from
          on-airport, near-airport, downtown and suburban locations
          to business and leisure travelers and to individuals who
          have lost the use of their vehicles through accident,
          theft or breakdown.  In addition to revenue from vehicle
          rentals, the industry derives significant revenue from
          the sale of rental related products such as insurance,
          refueling services and collision damage waivers.

               The domestic car rental industry includes eight
          major companies, Alamo Rent-A-Car, Inc., Avis, Budget
          Rent a Car Corporation ("Budget"), Dollar Rent a Car
          Systems, Inc. ("Dollar"), Enterprise Rent a Car, The
          Hertz Corporation ("Hertz"), National Car Rental System,
          Inc., and Thrifty Rent-A-Car Systems, Inc. ("Thrifty"),
          and a large number of smaller and regional or local
          firms, serving on-airport, near-airport and other
          locations.  Most of Avis's major competitors operate
          through a combination of wholly owned and franchised
          operations.  Other smaller car rental companies operate
          primarily through franchises.

               The domestic car rental industry has experienced
          significant growth over the last decade.  The total
          annual U.S. revenue for the car rental industry has been
          estimated by industry sources at $13.5 billion in 1995,
          an 11.8% compound annual growth rate from $4.4 billion in
          1985, and the total number of rental vehicles in service
          in the United States has been estimated by industry
          sources at 1.5 million in 1995, a 7% compound annual
          growth rate from 760,000 in 1985.  The Company believes
          that the factors driving this industry growth include
          increases in airline passenger traffic due to lower
          airfares, overcapacity in the hotel industry, the trend
          toward shorter, more frequent vacations resulting from
          the growth of the number of households with two wage
          earners, the demographic trend toward older, more
          affluent Americans who travel more frequently, and
          increased business travel.  The Company believes that
          future growth of the car rental industry will be
          determined by general economic conditions, developments
          in the travel industry, and a variety of other factors,
          including the car rental industry's relationship with
          major vehicle manufacturers.  Accordingly, the Company
          cannot predict whether such growth will continue and, if
          so, whether it will continue at rates comparable to those
          of the recent past.

               Car renters generally are (i) business travelers
          renting under negotiated contractual arrangements between
          specified rental companies and the travelers' employers,
          (ii) business travelers who do not rent under negotiated
          contractual arrangements (but who may receive discounts
          through travel, professional or other organizations), and
          (iii) leisure travelers, including renters who have lost
          the use of their own vehicles through accident, theft or
          breakdown.  Contractual arrangements normally are the
          result of negotiations between rental companies and large
          corporations, based upon rates, billing and service
          arrangements, and influenced by reliability and renter
          convenience.  Business travelers who are not parties to
          negotiated contractual arrangements and leisure travelers
          generally are influenced by advertising, renter
          convenience and access to special rates because of
          membership in travel, professional and other
          organizations.

               Many of Avis's major competitors are owned by, or
          are affiliated with, the major automobile manufacturers,
          and each of the major domestic car rental companies
          maintains a close relationship with one or more United
          States automobile manufacturers.  At August 1, 1996, Ford
          Motor Company owned Hertz and had an equity interest in
          Budget; and Chrysler had equity interests in Dollar and
          Thrifty.  Automobile manufacturers often provide
          financing for the purchase of vehicles and provide
          payments to car rental companies in consideration of
          advertising and promotional programs that benefit the
          manufacturers.  In addition, manufacturers provide fleet
          assistance programs, including major vehicle
          manufacturers' repurchase programs ("Repurchase Programs
          ") and similar arrangements, which protect rental
          companies against loss on disposition of vehicles and
          enable rental companies to adjust their fleet size to
          take account of seasonal variations in demand.

          AVIS CAR RENTAL OPERATIONS

          THE AVIS SYSTEM

               System-Wide Services.  Avis provides the Avis System
          with: (i) national promotion, advertising and public
          relations services; (ii) reservations and information
          systems; (iii) data processing support; (iv) marketing
          programs with hotels and airlines; (v) a sales staff for
          marketing to corporate customers and the travel
          community; (vi) credit card services for commercial
          customers; (vii) training in local marketing techniques;
          and (viii) operation and training support.  Avis's
          on-line real-time data processing and information system,
          known as the Wizard System, connects more than 2,000 Avis
          locations in the United States, Canada, Europe and a
          number of other countries.

                    The Wizard System.  The Wizard System is a
          telecommunications and computer processing system which
          is used in the Avis System for reservations, rental
          agreement processing, accounting, fleet control and a
          variety of other purposes.  It is operated by WizCom
          International, Ltd. ("WizCom"), a wholly owned subsidiary
          of Avis.  In 1995, Budget entered into a computer
          services agreement with WizCom that provides Budget with
          certain reservation system computer services that are
          similar to computer services provided to the Avis System. 
          WizCom has also entered into agreements with hotel and
          other rental car companies to provide travel related
          reservation and distribution system services.  Avis uses
          the Wizard System as a marketing tool and benefits from
          the operating efficiencies obtained through the Wizard
          System. 

               The Wizard System is operated by Avis, and is linked
          to more than 12,000 terminals in more than 2,000 rental
          locations through telephone lines and satellite
          communications.  Among the features of the Wizard System
          which are not available on most competitors' systems are
          (a) an advanced graphical interface reservation system;
          (b) "Rapid Return," which permits customers who are
          returning cars to obtain completed charge records from
          radio-connected "Roving Rapid Return" agents who complete
          and deliver the charge record at the car as it is being
          returned; (c) "Wizard on Wheels," which enables Avis
          locations to assign cars and complete rental agreements
          while customers are being transported to the car; (d)
          "Avis Link," which automatically identifies a customer
          using American Express or other major credit card who is
          entitled to special rental rates and conditions, and
          therefore sharply reduces the number of instances in
          which Avis inadvertently fails to honor the benefits of
          negotiated rate arrangements to which they are entitled;
          (e) interactive interfaces through the airline
          computerized reservation systems described under
          "Marketing"; (f) sophisticated fleet control and revenue
          management programs which, among other things, enable
          rental agents to ensure that a customer who rents a
          particular type of vehicle will receive the available
          vehicle of that type which has the lowest mileage
          (benefitting the customer and Avis by more evenly
          dispersing utilization among cars of a particular type);
          and (g) a comprehensive control and reporting system that
          enables Avis to adapt quickly to changes in customer
          requirements.  Avis also benefits from the low cost and
          speed of billing available as a result of broad use of
          the Wizard System and believes that the Wizard System
          keeps its clerical and communications costs below those
          of its competitors.

          RENTAL OPERATIONS

               Avis rents a wide variety of automobiles and
          minivans, most of which consist of the current and
          immediately preceding model years.  Car rentals are
          generally made on a daily, weekly or monthly basis. 
          Rental charges in the United States usually are computed
          on the basis of the length of the rental or on the length
          of the rental plus a mileage charge.  Additional charges
          are made for refueling service, loss damage waivers (a
          waiver of Avis's right to make a renter pay for damage to
          the rented car), personal accident insurance, personal
          effects protection and, in some instances, additional
          liability insurance.  Rates vary at different locations
          depending on the type of vehicle, the local market and
          competitive and cost factors.  Most rentals are made
          utilizing rate plans under which the customer is
          responsible for gasoline used during the rental.  Avis
          also generally offers its customers the convenience of
          leaving a rented car at an Avis location in a city other
          than the one in which it was rented under its "Rent it
          Here -- Leave it There" program, although, consistent
          with industry practices, a drop-off charge or special
          intercity rate may be imposed.

               North American Operations.  Approximately 88% of
          Avis's United States rental revenue is generated at 174
          of the busiest airports in the United States.  Avis's
          rental revenue as a percentage of total rental revenues
          at those airports for the five-year period ended February
          29, 1996 approximated 26%; 23.7%; 24.1%; 22.3% and 23.8%,
          respectively. 

               At August 1, 1996, Avis owned and operated
          approximately 406 corporate car rental facilities at
          airport, near-airport and downtown locations throughout
          the United States and approximately 36 corporate car
          rental facilities in Canada.  Of these facilities,
          approximately 191 primarily serve airport business and
          approximately 251 are non-airport locations.  By focusing
          on travelers at the major airports, Avis has been able to
          operate more vehicles from significantly fewer rental
          sites than its competitors, yielding significant
          economies of scale.  Avis's emphasis on airport traffic
          has resulted in a strong competitive position at the
          major domestic rental-revenue airports.

               Avis has 77 independent licensees which operate
          locations in the United States.  The two largest
          licensees operate the Avis System in the Los Angeles and
          Dallas area and account for approximately half of all
          United States licensees' rentals.  Certain licensees in
          the United States pay Avis a fee equal to 5% of their
          total time and mileage charges, less all customer
          discounts, of which Avis is required to pay 40% for
          corporate licensee-related programs, while six licensees
          pay 8% of their gross revenue.  Licensees outside the
          United States normally pay higher fees.  Most of Avis's
          United States licensees currently pay 50 cents per rental
          agreement for use of the Wizard System, and they are
          charged for use of other aspects of the Wizard System. 

               Avis is in many cases one of five to seven vehicle
          concessionaires at the airports at which it operates.  In
          general, concession fees for airport locations are based
          on a percentage of total commissionable revenues (as
          determined by each airport authority), subject to a
          minimum guaranteed amount.  Concessions are typically
          awarded by airport authorities every three to five years
          based upon competitive bids.  Avis's concession
          arrangements with the various airport authorities
          generally include minimum requirements for vehicle age,
          operating hours and employee conduct, and provide for
          relocation in the event of future construction and
          abatement of fees in the event of extended low passenger
          volume.

               International Operations.  In addition to countries
          served by Avis Europe and its affiliates and licensees,
          Avis's subsidiaries, joint ventures and licensees operate
          the Avis System internationally in approximately 65
          countries and territories, with wholly owned subsidiaries
          in Canada, Argentina, Australia, New Zealand, Puerto Rico
          and the United States Virgin Islands, and joint ventures
          in Jamaica, Singapore and Malaysia.  The principal
          business of Avis's foreign subsidiaries is car rentals.

               Avis's international system (not including Avis
          Europe) operates a combined peak rental and leasing fleet
          of approximately 44,000 vehicles, of which approximately
          23,000 are operated by subsidiaries, and the balance by
          joint ventures and licensees.  Revenues of the foreign
          subsidiaries in the fiscal year ended February 29, 1996,
          totaled approximately $212 million, without taking
          account of revenues of joint ventures or licensees. 

          MARKETING

               In the United States, approximately 70% of Avis's
          fiscal 1996 rentals were generated by travelers who used
          the Avis System under contractual arrangements negotiated
          by Avis with either the travelers' corporate employers or
          organizations such as American Association of Retired
          Persons in which the travelers have memberships.  The
          remainder of the rental activity is from business
          travelers who are not affiliated with corporations or
          organizations with which Avis has contractual
          arrangements, and from leisure renters.  Avis's corporate
          sales organization is the principal source of contractual
          arrangements with corporate accounts.  Unaffiliated
          business travelers are solicited by direct mail,
          telemarketing and advertising campaigns.

               Avis solicits contractual arrangements with
          corporate accounts by emphasizing the Wizard System's
          advanced technology, customer service, pricing and a
          worldwide rental network.  The Wizard System plays a
          significant part in securing business of this type
          because the Wizard System enables Avis to offer a wide
          variety of pricing combinations, special reports and
          tracking techniques tailored to the particular needs of
          each account, and to assure adherence to agreed-upon
          rates.

               Avis's presence in the United States leisure and
          incidental business segment is substantially less
          significant than its presence in the United States
          commercial account segment.  Leisure rental activity is
          important in enabling Avis to balance the use of its
          fleet.  Typically, business renters use cars from Monday
          through Thursday, while in most areas of the United
          States leisure renters use cars primarily over weekends. 
           
               Avis maintains strong links to the air travel
          industry.  It has arrangements with American Airlines,
          America West Airlines, Continental Airlines, Delta
          Airlines, Trans World Airlines, United Airlines, USAir
          and Northwest Airlines (collectively, the "Airlines")
          under which participants in the Airlines' frequent flier
          programs can earn mileage credits whenever they rent Avis
          cars.  Frequent flier programs (under which travelers can
          earn reduced fares or free flights based upon miles flown
          on particular airlines) are a significant sales incentive
          to United States travelers, and the Company believes Avis
          benefits significantly from its frequent flier
          arrangements with the Airlines.  All the other major car
          rental companies also participate in one or more airline
          frequent flier programs. 

               Car renters can make Avis reservations through all
          four major United States based global distribution
          systems and several international based systems.  Users
          of the United States based global distribution systems
          can obtain access through these systems to the Avis
          reservation system concerning among other things, rental
          locations, vehicle availability, applicable rate
          structures and gives them the ability to reserve and
          confirm Avis vehicles directly through these systems.

               Avis also maintains strong links to the hotel
          industry.  Avis has arrangements with Hilton Corporation,
          the Hyatt Corporation and the Sheraton Marketing
          Corporation frequent traveler programs, which provide
          various incentives to all program participants.

          RENTAL VEHICLE PURCHASES

               Avis participates in a variety of vehicle purchase
          programs with major domestic and foreign manufacturers,
          although actual purchases are made directly through local
          car dealers.  The average price for automobiles purchased
          by Avis in 1996 for its rental fleet was approximately
          $16,250.00.  On average during model year 1996, 82% of
          the purchases were comprised of GM vehicles, 13% of
          Chrysler vehicles and 5% of Nissan, Subaru, Hyundai,
          Ford, Toyota and Land Rover vehicles.  These percentages
          vary among Avis's operations and will most likely change
          from year to year.  The vehicle purchase programs
          sponsored by manufacturers sometimes provide Avis with
          sales incentives for the purchase of certain models, and
          most of these programs allow Avis to serve as a drop-ship
          location for vehicles, thus enabling Avis to receive a
          fee from the manufacturers for preparing newly purchased
          vehicles for use.  There can be no assurance that Avis
          will continue to be able to benefit from sales incentives
          in the future.

               Most of Avis's cars in the United States are
          purchased, owned and sold by Prime Vehicles Trust, a
          trust created by Avis of which Avis is the sole
          beneficiary, or by corporate nominees of Prime Vehicles
          Trust.  All decisions regarding Prime Vehicles Trust
          purchases and sales of cars are made by Avis, and Prime
          Vehicles Trust is combined with Avis for both financial
          and tax accounting.  The existence of Prime Vehicles
          Trust has no effect on Avis's control of the cars in its
          fleet.  However, Avis believes the existence of Prime
          Vehicles Trust has been useful in obtaining financing
          secured by its cars.  Avis expects to continue to take
          advantage of Prime Vehicles Trust to finance future fleet
          purchases.

          FLEET UTILIZATION AND SEASONALITY

               Avis's business is subject to seasonal variations in
          customer demand, with the summer vacation period
          representing the peak season for vehicle rentals.  This
          general seasonal variation in demand, along with more
          localized changes in demand at each of Avis's operations,
          causes Avis to vary its fleet size over the course of the
          year.  In fiscal year 1996, Avis's average monthly fleet
          size ranged from a low of 127,000 vehicles in January to
          a high of 149,000 vehicles in August.  Fleet utilization,
          which is based on the average number of days vehicles are
          rented compared to the total number of days vehicles are
          available for rental, ranged from 65% in December to 82%
          in August and averaged 74% for all of fiscal year 1996.

          RENTAL VEHICLE DISPOSITION

               Avis's current operating strategy is to maintain its
          fleet at an average age of 12 months or less. 
          Approximately 90% of the vehicles purchased by Avis in
          model year 1996 were eligible for participation in
          manufacturers' Repurchase Programs.  These programs
          currently require that Avis maintain vehicles that are
          subject to the terms of manufacturers' Repurchase
          Programs ("Program Vehicles") in its fleet for a minimum
          of six months and impose numerous return conditions,
          including those related to mileage and repair condition. 
          Less than 2.5% of the Program Vehicles purchased by Avis
          and scheduled to be returned in 1995 were ineligible for
          return.  At the time of return to the manufacturer, Avis
          receives the price guaranteed at the time of purchase and
          is thus protected from fluctuations in the prices of
          previously-owned vehicles in the wholesale market at the
          time of disposition.  The future percentage of Program
          Vehicles in Avis's fleet will be dependent on the
          availability and attractiveness of the manufacturers'
          Repurchase Programs, over which Avis has no control.  

               In addition, Avis sells cars wholesale to dealers in
          the United States either through informal arrangements or
          at auction through standard consignment agreements.

          AVIS CAR RENTAL FACILITIES

               Avis leases almost all of its airport and
          non-airport car rental facilities and currently operates
          from 406 corporate rental locations.  The airport
          facilities are located on airport property owned by
          airport authorities or located near the airport on
          locations convenient for bus transport of customers to
          the airport.  One of Avis's airport facilities in each
          Avis region serves as the administrative headquarters for
          the region and, as a general rule, each airport facility
          includes vehicle storage areas, a vehicle maintenance
          facility, a car wash, a refueling station and rental and
          return facilities.  In all airport locations, the
          facility leases are not co-terminus with the local
          airport concession agreement.  Avis's non-airport
          facilities generally consist of a limited parking
          facility and a rental and return desk and are generally
          subject to long-term leases with renewal options. 
          Certain of these leases also have purchase options at the
          end of their terms. 

          INSURANCE

               Avis generally assumes the risk of liability to
          third parties in the United States for up to $1 million
          per occurrence.  It has purchased significant excess
          insurance coverage against risks which exceed $1 million
          per occurrence.  One of the benefits of Avis's retaining
          the risk up to $1 million per occurrence is that Avis
          maintains its own claims department, which controls the
          disposition of most claims.  The Company believes that
          the maintenance by Avis of its own claims department in
          recent years has helped contain Avis's cost of claims
          paid. 

               Under its standard car rental contract, Avis
          provides its renters liability coverage up to the minimum
          financial responsibility limits required by applicable
          law.  Higher limits are provided by separate agreement to
          some United States national corporate accounts and Avis
          makes available to renters, for an additional daily
          charge, participation in a group policy underwritten by a
          major national insurer which increases renters' coverage
          to one million dollars.  Avis also offers renters, for
          additional daily charges, "Personal Accident Insurance,"
          which pays medical expenses and accidental death benefits
          for accidents during the rental period, and "Personal
          Effects Protection," which ensures against loss or damage
          to the renters' personal belongings during the rental
          period.  Both these coverages are underwritten by major
          national insurers.

          REGULATORY AND ENVIRONMENTAL MATTERS

               Avis is subject to federal, state and local laws and
          regulations including those relating to taxing and
          licensing of vehicles, franchising, consumer credit,
          environmental protection, retail vehicle sales and labor
          matters.  The principal environmental regulatory
          requirements applicable to Avis's operations relate to
          the ownership or use of tanks for the storage of
          petroleum products, such as gasoline, diesel fuel and
          waste oils; the treatment or discharge of waste waters;
          and the generation, storage, transportation and off-site
          treatment or disposal of solid or liquid wastes.  Avis
          operates 232 domestic and international locations at
          which petroleum products are stored in underground or
          aboveground tanks.  Avis has instituted an environmental
          compliance program designed to ensure that these tanks
          are in compliance with applicable technical and
          operational requirements, including the replacement of
          underground steel tanks and periodic integrity testing of
          underground storage tanks.  The Company believes that the
          locations where Avis currently operates are in
          compliance, in all material respects, with such
          regulatory requirements. 

               Avis may also be subject to requirements related to
          the remediation of, or the liability for remediation of,
          substances that have been released to the environment at
          properties owned or operated by Avis or at properties to
          which Avis sends substances for treatment or disposal. 
          Such remediation requirements may be imposed without
          regard to fault and liability for environmental
          remediation can be substantial.

               Avis may be eligible for reimbursement or payment of
          remediation costs associated with future releases from
          its regulated underground storage tanks.  Certain of the
          states in which Avis maintains underground storage tanks
          have established funds to assist in the payment of
          remediation costs for releases from certain registered
          underground tanks.  Subject to certain deductibles, the
          availability of funds, compliance status of the tanks and
          the nature of the release, these tank funds may be
          available to Avis for use in remediating future releases
          from its tank systems. 

               A traditional revenue source for the car rental
          industry has been the sale of loss damage waivers, by
          which car rental companies agree to relieve a customer
          from financial responsibility arising from vehicle damage
          to the rented car incurred during the rental period. 
          Approximately 3% of Avis's rental revenue during 1995 was
          generated by the sale of loss damage waivers.  The U.S.
          House of Representatives has from time to time considered
          legislation that would regulate the conditions under
          which loss damage waivers may be sold by car rental
          companies.  House Bill H.R. 175, introduced in January
          1995, seeks to prohibit the imposition of liability on
          renters for loss of, or damage to, rented vehicles,
          except in certain circumstances, and would prohibit the
          sale of loss damage waivers.  To date, no action has been
          taken on this bill.  In addition, approximately 40 states
          have considered legislation affecting the sale of loss
          damage waivers.  To date, 24 states have enacted
          legislation which regulates the sale of loss damage
          waivers, most of which requires disclosure to each
          customer at the time of rental that damage to the rented
          vehicle may be covered by the customer's personal
          automobile insurance and that loss damage waivers may not
          be necessary.  In addition, in the late 1980's, New York
          and Illinois enacted legislation which eliminated Avis's
          right to offer loss damage waivers for sale and limited
          potential customer liability to $100 and $200,
          respectively.  Moreover, California, Nevada and Indiana
          have capped rates that may be charged for collision
          damage waivers to $9.00, $10.00 and $5.00 per day,
          respectively.  Texas requires that the rate charged for
          loss damage waivers be reasonably related to the direct
          cost of the repairs.  Adoption of national or additional
          state legislation eliminating or limiting the sale of
          loss damage waivers could result in the loss or reduction
          of this revenue source and additional limitations on
          potential customers liability could increase Avis's
          costs. 

          LEGAL MATTERS

               From time to time, Avis is subject to routine
          litigation incidental to its business.  Avis maintains
          insurance policies that cover most of the actions brought
          against Avis.  See "-- Insurance." Avis is currently not
          involved in any legal proceeding which it believes would
          have a material adverse effect upon its financial
          condition or operations.

          EMPLOYEES

               Avis has more than 20,000 employees worldwide.  Of
          these, approximately 375 are employed in executive,
          financial and administrative capacities, approximately
          240 are engaged in marketing or sales capacities,
          approximately 460 are involved in system design and
          constant upgrading of the Wizard System, approximately
          700 are engaged in clerical activities in connection with
          the administration of Avis and the balance are engaged in
          car rentals and car care at rental locations. 
          Approximately 20% of Avis's employees are represented by
          65 various local unions under contracts expiring on a
          variety of dates.  No local union represents more than
          2.5% of Avis's employees.  Avis believes its
          relationships with its employees are good.

          PROPERTIES

               Avis leases or has concessions relating to space at
          707 locations in the United States and 117 locations
          outside the United States for all of its operations.  Of
          those locations, 182 in the United States and 47 outside
          the United States are at airports.  Additionally, 38
          locations in the United States are owned and three
          locations outside the United States are owned. 
          Typically, an airport receives a percentage of car rental
          revenues, with a guaranteed minimum.  Because there is a
          limit to the number of car rental locations in an
          airport, car rental companies frequently bid for the
          available locations, usually on the basis of the size of
          the guaranteed minimums.  Avis and other car rental firms
          also rent parking space on or near airports and at their
          other car rental locations.

               Avis's principal offices are in a 405,000 square
          foot complex in Garden City, New York, for which Avis
          currently pays approximately $875,000 per year under a
          lease which, by exercising renewal options, has been
          extended to 2015.  The Avis reservation system is run
          from leased space in Tulsa, Oklahoma.  Avis also
          maintains terminal network facilities which it uses in
          connection with the Wizard System in Garden City, Tulsa,
          San Francisco, California and Bracknell, England.  Avis
          also owns a 166,000 square foot building in Virginia
          Beach, Virginia which serves as a satellite
          administrative and reservation facility.

          CERTAIN PROVISIONS OF THE AVIS ACQUISITION AGREEMENTS 

               HFS has certain continuing obligations under the
          Stock Purchase Agreement and the Merger Agreement (each
          as defined below) entered into in connection with the
          Avis Acquisition relating to potential post-closing
          payments to be made under such agreements.  The following
          is a brief summary of those obligations, and does not
          purport to be complete and is subject to, and qualified
          in its entirety by reference to, such agreements, which
          are exhibits hereto and are incorporated by reference
          herein.  

               In connection with the Avis Acquisition, General
          Motors Corporation ("GM") received 1,340,898 shares (the
          "GM Shares") of HFS common stock (the "HFS Common
          Stock").  Pursuant to the Stock Purchase Agreement, dated
          as of August 28, 1996, between HFS and GM as amended by
          the letter agreement, dated December 13, 1996 (together,
          the "Stock Purchase Agreement"), GM will be entitled to
          receive cash equal to the amount by which $99,311,000
          (the value attributable under the Stock Purchase
          Agreement to the HFS Common Stock received by GM in the
          Avis Acquisition) exceeds the proceeds realized upon the
          subsequent sale of such HFS Common Stock (deeming all HFS
          Common Stock received by GM and not sold prior to January
          31, 1997 to have been sold on January 31, 1997). HFS
          shall also pay to GM interest, on a pre-determined value
          of $74.063 for each of the 1,067,398 shares of HFS Common
          Stock held by GM on December 13, 1996, at a rate of LIBOR
          plus 100 basis points, which interest shall accrue from
          November 17, 1996 to, but not including, the date of sale
          of such shares or January 31, 1997, in the case of any GM
          Shares not sold prior to January 31, 1997.  The payments
          described above shall be made no later than February 7,
          1997.

               The letter agreement is attached hereto as Exhibit
          99.3 and is incorporated herein by reference.

               In connection with the Avis Acquisition, the Avis,
          Inc. Employee Stock Ownership Plan (the "Avis ESOP")
          received from HFS 3,187,421 shares of HFS Common Stock
          (the "ESOP Shares").  Pursuant to the Agreement and Plan
          of Merger, dated as of August 23, 1996, as amended, by
          and among HFS, Avis Acquisition Corp., U.S. Trust Company
          of California, N.A., as Trustee and Avis (the "Merger
          Agreement"), the Avis ESOP will be entitled to receive
          cash in an amount equal to the "Post-Closing
          Consideration."  The "Post-Closing Consideration" shall
          equal $337 million, plus interest thereon at the rate
          prescribed in the Merger Agreement, less the proceeds
          received by the Avis ESOP upon any sale of ESOP Shares
          and the value of the ESOP Shares based upon any deemed
          sale of such shares as provided for in the Merger
          Agreement, and less interest on such proceeds and deemed
          sale proceeds at the rate prescribed in the Merger
          Agreement; provided, that in no event shall the Post-
          Closing Consideration exceed $370.7 million.  Payment of
          the Post-Closing Consideration, if any, will be made not
          later than October 22, 1997.

          ii)  THE RCI ACQUISITION

          GENERAL

               On November 12, 1996, the Company completed the
          acquisition of all the outstanding capital stock of RCI
          and its affiliates for approximately $625 million,
          comprised of $550 million in cash and $75 million in
          Common Stock of the Company, plus future contingent
          payments of up to $200 million over the next five years.

               RCI, based in Indianapolis, Indiana and incorporated
          as an Indiana corporation in 1974, is the world's largest
          provider of timeshare exchange programs for approximately
          two million timeshare owners and approximately 3,000
          resorts around the world.  The RCI Network enables a
          member who owns a timeshare interest in a resort property
          that is affiliated with the RCI Network to exchange such
          timeshare interest for a timeshare interest of equivalent
          value in another affiliated resort.  RCI also is engaged
          in publishing related to the timeshare industry and
          provides other travel-related services, integrated
          software systems and resort management and consulting
          services.  Exchange and travel-related revenue of RCI was
          $158.6 million and $278.1 million for the six months
          ended June 30, 1996 and the year ended December 31, 1995,
          respectively.

               The Company expects that the acquisition of RCI will
          provide increased  marketing opportunities between RCI
          and the Company's lodging, car rental and real estate
          brokerage products as well as further opportunities to
          expand the  Company's preferred vendor program.  The
          Company also expects that RCI will  benefit from certain
          economies of scale and other synergies resulting from 
          RCI's affiliation with the Company's lodging, car rental
          and real estate brokerage franchisor operations.

          TIMESHARE EXCHANGE INDUSTRY OVERVIEW

               Timesharing for the resort industry is the shared
          ownership and/or periodic use of property by a number of
          users or owners for a defined period of years or in
          perpetuity.  An example of a simple form of timeshare is
          a condominium unit that is owned by fifty-two persons,
          with each person having the right to use the unit for one
          week of every year.  In the United States, industry
          sources estimate that the average price of such a
          timeshare is about $7,500 to $10,000, plus a yearly
          maintenance fee of approximately $350.  In 1995, sales of
          timeshares exceeded $5 billion worldwide.  Approximately
          52% of all timeshare owners reside in the United States,
          while approximately 21% reside in Europe.  Industry
          sources have estimated that the total number of owners of
          timeshare interests is approximately 3.5 million, while
          the total number of timeshare resorts worldwide has been
          estimated to be approximately 4,500.

               A timeshare exchange provides an owner of a
          timeshare interest in a particular resort property with
          the ability to exchange such interest for a timeshare
          interest of equivalent value in another resort. 
          Timeshare exchange accounts for approximately two-fifths
          of the timeshare holidays taken worldwide each year.  Two
          principal segments make up the timeshare exchange
          industry: owners of timeshare interests and resort
          properties.  The timeshare exchange industry derives
          revenue from annual membership fees paid by owners of
          timeshare interests, affiliation fees paid by timeshare
          resort properties, and exchange fees paid by such owners
          for each exchange that is arranged by a timeshare
          exchange company.

               The global timeshare exchange industry consists of
          two major companies, RCI and Interval International
          ("Interval"), a wholly-owned subsidiary of CUC
          International, as well as a small number of smaller
          firms.  Approximately 95% of the 4,500 timeshare resorts
          in the world are affiliated with either RCI or with
          Interval.  In addition, RCI has approximately 2.1 million
          timeshare owners who are members while Interval has
          almost 700,000 timeshare owners who are members.

               The timeshare industry has experienced significant
          growth over the past decade.  The Company believes that
          the factors driving this industry growth include the
          demographic trend toward older, more affluent Americans
          who travel more frequently, the entrance of major
          hospitality and entertainment companies into timeshare
          development, a worldwide acceptance of the concept, an
          increasing focus on leisure activities, family health and
          a desire for value, variety and flexibility in a vacation
          experience.  The Company believes that future growth of
          the timeshare exchange industry will be determined by
          general economic conditions both in the U.S. and
          worldwide, the public image of the industry, improving
          approaches to providing marketing and sales, a greater
          variety of products and broadening the timeshare market
          and a variety of other factors.  Accordingly, the Company
          cannot predict whether such growth will continue and, if
          so, whether it will continue at rates comparable to those
          of the recent past.  

          RCI TIMESHARE EXCHANGE OPERATIONS

          MEMBERSHIP

               The RCI Network provides a network for approximately
          2.1 million members who own timeshare interests in a
          resort that is affiliated with the RCI Network which
          enables such members to exchange their timeshare interest
          for a timeshare interest of equivalent value in another
          affiliated resort.  Approximately 1,100,000 members of
          the RCI Network reside outside of the United States,
          which account for 52% of the total members of the RCI
          Network.  RCI's membership volume has grown at a compound
          annual rate for the last five years of approximately 10%,
          while exchange volumes have grown at a compound annual
          rate of approximately 12% for the same time period.

               RCI provides members of the RCI Network with access
          to both domestic international timeshare resorts,
          publications regarding timeshare exchange opportunities,
          and other travel-related services, including discounted
          purchasing programs.  See "--Publications" and "--Other
          Services Provided by RCI." In the United States, members
          pay an average annual membership fee of $67 as well as an
          average exchange fee of $100 for every exchange arranged
          by RCI.  In 1995, membership and exchange fees amounted
          to approximately $230 million.  RCI arranged
          approximately 1.6 million exchanges in 1995.

               Developers of resorts affiliated with the RCI
          Network typically pay the first year membership fee for
          new members upon the sale of the timeshare interest.  See
          "--Affiliated Timeshare Resorts and Developers."  In the
          United States more than 75% of such owners renew their
          membership in their second year and more than 90% renew
          each year thereafter.

          OTHER SERVICES PROVIDED BY RCI

               Travel Services.  RCI provides travel services to
          U.S. members of the RCI Network through its affiliate,
          RCI Travel, Inc. ("RCIT").  On a global basis, RCI
          provides travel services through entities operating in
          local jurisdictions (hereinafter, RCIT and local entities
          referred to as "Travel Agencies").  Travel Agencies
          provide airline reservations and airline ticket sales
          services to members in conjunction with the arrangement
          of their timeshare exchanges, as well as providing other
          types of travel services including hotel accommodations,
          car rentals, cruises and tours.  Travel Agencies also
          from time to time offer travel packages utilizing resort
          developers' unsold inventory to provide both revenue and
          prospective timeshare purchasers to the resort.

               Advertising.  RCI provides its affiliated resorts
          with advertising opportunities in its member and
          developer focused publications, as well as through its
          site on the Internet Worldwide Web at http:\\www.rci.com.

               Sales and Marketing Supporting.  RCI provides a wide
          variety of sales and marketing materials to assist its
          affiliated resorts in their timeshare sales process. 
          These include a video explaining the concept of vacation
          ownership and exchange, posters, wall tours customized
          for the resort, a wide variety of promotional brochures
          and the Endless Vacation Special Resort Edition
          Directory.  Interactive multi-media sales tools are also
          under development.  In addition, RCI uses
          state-of-the-art database marketing techniques to
          identify highly qualified sales prospects for its resort
          affiliates.

               Timeshare Consulting.  RCI provides worldwide
          timeshare consulting services through its affiliate, RCI
          Consulting, Inc.  These services include comprehensive
          market research, site selection, strategic planning,
          community economic impact studies, resort concept
          evaluation, financial feasibility assessments, on-site
          studies of existing resort developments, and tailored
          sales and marketing plans.

               Resort Management Software.  RCI provides computer
          software systems to timeshare resorts and developers
          through its affiliate, Resort Computer Corporation
          ("RCC").  RCC provides software that integrates resort
          functions such as sales, accounting, inventory,
          maintenance, dues and reservations.

               Property Management.  RCI provides resort property
          management services through its affiliate, RCI
          Management, Inc. ("RCIM").  RCIM is a single source for
          any and all resort management services, and offers a menu
          including hospitality services, a centralized
          reservations service center, advanced reservations
          technology, human resources expertise and owner's
          association administration.

          AFFILIATED TIMESHARE RESORTS AND DEVELOPERS

               Approximately 3,000 timeshare resorts are affiliated
          with the RCI Network, of which approximately 1,250
          resorts are located in the United States and Canada;
          1,100 are in Europe and Africa, 400 are in Mexico and
          Latin America, and 250 are in the Asia-Pacific region. 
          The terms of RCI's affiliation agreement with its resorts
          generally require that the developer enroll each new
          timeshare purchaser at the resort as a member of RCI,
          license the affiliated resort to use the RCI name and
          marks, set forth the materials and services RCI will
          provide to the affiliate and generally describe RCI's
          expectations of the resort's management, representation
          of the exchange program, minimum enrollment requirements
          and treatment of exchange guests.  Affiliation agreements
          are typically for a term of five or six years and
          automatically renew for like terms thereafter unless
          either party takes affirmative action to terminate the
          relationship.  RCI makes available a wide variety of
          goods and services to its affiliated developers,
          including publications, advertising, sales and marketing
          materials, timeshare consulting services, resort
          management software, travel packaging and property
          management services.  See "--Other Services Provided by
          RCI."

               Developers of affiliated resorts typically pay the
          first year membership fee for new members upon the sale
          of the timeshare interest.  Vistana Development, Orange
          Lake Country Club and Fairfield Communities have provided
          the greatest number of members currently enrolled in the
          RCI Network.

          PUBLICATIONS

               RCI publishes numerous magazines and periodicals,
          often in several languages, relating to the vacation and
          timeshare industry.  The Endless Vacation Special Resort
          Edition, and its counterpart in various countries, is
          RCI's premier publication and contains full color, photo
          listings of RCI resorts.  Endless Vacation, Holiday, and
          Vacacciones Sin Fin are magazines directed at subscribing
          members in North America and Singapore, Europe and
          Africa, and Latin America, respectively.  Perspective,
          Review, Timeshare Business Quarterly and Intercambio are
          magazines or newsletters directed at resort affiliates,
          developers, homeowners associations and industry
          personnel in North America, Europe, Asia-Pacific and
          Latin America, respectively.  RCI's approximately 2.1
          million members are subscribers to its magazines. 
          Developer periodicals are made available to resorts and
          others in the industry at no charge.

          REGULATORY AND ENVIRONMENTAL MATTERS

               RCI is subject to federal, state and local laws and
          regulations including those relating to taxing, consumer
          credit, environmental protection and labor matters.  In
          addition, RCI is subject to state statutes in those
          states regulating timeshare exchange services, and must
          prepare and file annually with regulators in states which
          require it, the RCI Disclosure Guide to Vacation
          Exchange.  RCI is not subject to those state statutes
          governing the development of timeshare condominium units
          and the sale of timeshare interests, but such statutes
          directly affect the members and resorts that participate
          in the RCI Network and therefor the statutes indirectly
          impact RCI.

               The Company believes that RCI is in substantial
          compliance with all of the regulatory requirements of the
          various jurisdictions in which RCI operates.

          LEGAL MATTERS

               From time to time, RCI is subject to routine
          litigation incidental to its business.  RCI maintains
          insurance policies that cover most of the actions brought
          against RCI.  RCI is not involved in any legal proceeding
          which it believes would have a material adverse effect
          upon its financial condition or operations.

          EMPLOYEES

               RCI has approximately 4,200 employees worldwide.  Of
          these, approximately 1,500 are employed in executive,
          financial and administrative capacities, approximately
          1,800 are engaged in marketing or sales capacities,
          approximately 325 are involved in the travel services
          business, approximately 70 are involved in the resort
          software business, and approximately 500 are involved in
          the resort-management business.  None of RCI's employees
          are represented by unions or collective bargaining
          agreements.  RCI believes that its relationships with its
          employees are good.

          PROPERTIES

               RCI leases space at 18 locations in the United
          States and 32 locations outside of the United States for
          all of its operations.  Additionally, one location in the
          United States is owned and four locations outside of the
          United States are owned.  RCI has offices in 33
          countries.

               RCI's principal offices are in a 108,000 square foot
          complex known as the Woodview Trace building, located in
          Indianapolis, Indiana.  RCI leases the land and building
          from a limited liability company controlled by a director
          of HFS.  The lease provides for an initial five year term
          expiring December 31, 2001 and contains ten renewal
          options each for a term of five additional years.  The
          rent is approximately $1,600,000 per year for the
          original term of the lease, and is subject to adjustment
          to reflect changes in the cost of living upon the
          exercise of each renewal option.

          B.   OTHER

               On November 26, 1996, Amre Inc. ("Amre") reached an
          agreement in principle with the Company to defer $9.6
          million of Amre's 1996 royalty obligation to the Company
          and modify the $11 million 1997 royalty payment to the
          Company so that such royalty is based on the cash flow of
          Amre.  The Company and Amre also agreed to restructure
          the terms of future royalty payments.

               The Company will record an allowance in the fourth
          quarter of 1996 on the $9.6 million receivable from Amre. 
          The allowance will be offset in large part by a $9.5
          million fee from Chartwell Leisure Inc. ("Chartwell")
          related to a termination of a services contract by
          Chartwell.

          Item 7.   Financial Statements, Pro Forma Financial
                    Information and Exhibits

               (c)  Exhibits

                    99.1 Stock Purchase Agreement (incorporated by
                         reference to Exhibit 2.2 to the Company's
                         Registration Statement on Form S-3 (Reg.
                         No. 333-11029), filed with the Securities
                         and Exchange Commission on August 29,
                         1996).

                    99.2 Merger Agreement (incorporated by
                         reference to Exhibit 2.1 to the Company's
                         Registration Statement on Form S-3 (Reg.
                         No. 333-11029), filed with the Securities
                         and Exchange Commission on August 29,
                         1996).

                    99.3 Letter Agreement, dated December 13, 1996,
                         between the Company and GM.

                    99.4 Agreement, dated as of September 11, 1996,
                         by and among the Company, Avis Acquisition
                         Corp., U.S. Trust Company of California,
                         N.A. and Avis.

                    99.5 Agreement, dated as of September 19, 1996,
                         by and among the Company, Avis Acquisition
                         Corp., U.S. Trust Company of California,
                         N.A. and Avis.

                    99.6 News Release, dated November 26, 1996.


                                  SIGNATURES

                    Pursuant to the requirements of the Securities
          Exchange Act of 1934, the registrant has duly caused this
          report to be signed on its behalf by the undersigned
          hereunto duly authorized.

                                   HFS INCORPORATED

                                   By: /s/ James E. Buckman     
                                      --------------------------
                                      James E. Buckman
                                      Executive Vice President
                                      and General Counsel

          Date:  December 24, 1996


                                EXHIBIT INDEX

                    99.1 Stock Purchase Agreement (incorporated by
                         reference to Exhibit 2.2 to the Company's
                         Registration Statement on Form S-3 (Reg.
                         No. 333-11029), filed with the Securities
                         and Exchange Commission on August 29,
                         1996).

                    99.2 Merger Agreement (incorporated by
                         reference to Exhibit 2.1 to the Company's
                         Registration Statement on Form S-3 (Reg.
                         No. 333-11029), filed with the Securities
                         and Exchange Commission on August 29,
                         1996).

                    99.3 Letter Agreement, dated December 13, 1996,
                         between the Company and GM.

                    99.4 Agreement, dated as of September 11, 1996,
                         by and among the Company, Avis Acquisition
                         Corp., U.S. Trust Company of California,
                         N.A. and Avis.

                    99.5 Agreement, dated as of September 19, 1996,
                         by and among the Company, Avis Acquisition
                         Corp., U.S. Trust Company of California,
                         N.A. and Avis.

                    99.6 News Release, dated November 26, 1996.
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==================================================================

                      SECURITIES AND EXCHANGE COMMISSION
                            WASHINGTON, D.C.  20549

                                 ___________

                                   FORM 8-K
            CURRENT REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
                       SECURITIES EXCHANGE ACT OF 1934

                     DECEMBER 24, 1996 (OCTOBER 17, 1996)
              (Date of Report (date of earliest event reported))

                               HFS INCORPORATED
            (Exact name of Registrant as specified in its charter)

               DELAWARE              1-11402          22-3059335
          (State or other          (Commission    (I.R.S. Employer
          jurisdiction of            File No.)     Identification
          incorporation or                              Number)
           organization)

            6 SYLVAN WAY
          PARSIPPANY, NEW JERSEY                         07054
          (Address of principal                        (Zip Code)
            executive office)

                                (201) 428-9700
             (Registrant's telephone number, including area code)

          ==================================================================

          Item 5.  Other Events

          A.   ACQUISITIONS

               In October and November, 1996, HFS Incorporated
          ("HFS" or the Company") completed two significant
          acquisitions, which are described below.

          i)   THE AVIS ACQUISITION

          GENERAL

               On October 17, 1996, the Company completed the
          acquisition (the "Avis Acquisition") of all of the
          outstanding capital stock of Avis, Inc. ("Avis"),
          including payments under certain employee stock plans of
          Avis and the redemption of certain series of preferred
          stock of Avis, for approximately $800 million. 

               Avis, together with its subsidiaries, licensees and
          affiliates, operates the Avis System, which the Company
          believes to be the second largest car rental system in
          the world.  The Avis System consists of over
          approximately 4,139 locations, including locations at
          most major airports as well as downtown locations in
          major cities in the United States and in approximately
          149 countries and territories.  Approximately 84% of the
          Avis System rental revenues in the United States are
          received from locations operated by Avis directly or
          under agency arrangements, with the remainder being
          received from locations operated by independent
          licensees.  Avis's international business is conducted by
          a network of several wholly owned subsidiaries and joint
          ventures along with a number of licensees and
          sublicensees.  The Avis System in Europe, Africa and the
          Middle East is operated by Avis Europe, which is
          approximately 9% owned by Avis.  The Avis System in
          Canada, Latin America, the Caribbean and Asia Pacific,
          comprising some 65 countries and territories, is operated
          by Avis subsidiaries, joint ventures and licensees. 
          During the peak summer season, the Avis System fleet
          worldwide consists of more than approximately 386,548
          vehicles representing the following allocations of
          vehicles throughout the system: (i) 189,616 in the Avis
          U.S. Corporate fleet; (ii) 44,000 vehicles in the Avis
          International fleet; (iii) 50,932 in the Avis U.S.
          Licensee fleet; and (iv) 102,000 in the Avis Europe
          fleet.

               In the United States, Avis's principal rental base
          is business travelers who use the Avis System under
          contractual arrangements between Avis and their
          employers.  Because business travel normally is heaviest
          between Monday and Thursday of each week, Avis's
          concentration on serving business travelers has led to
          excess fleet capacity from Friday through Sunday of most
          weeks.

               Following the acquisition of Avis, the Company
          currently intends to dispose of a majority interest in
          the corporation which owns all company owned Avis car
          rental locations (the "Operating Company") through an
          initial public offering of the common stock of the
          Operating Company during 1997.  It is expected that the
          Operating Company would operate under a license from Avis
          pursuant to which the Operating Company would pay Avis a
          royalty based upon the revenue of the Operating Company. 
          The Company expects that the acquisition of Avis will
          also provide further opportunities to expand the
          Company's preferred vendor program.

          CAR RENTAL INDUSTRY OVERVIEW

               The car rental industry provides car and truck
          rentals to business and individual customers worldwide. 
          The industry has been composed of two principal segments:
          general use (mainly at airport and downtown locations)
          and local/replacement (mainly at downtown and suburban
          locations).  The car rental industry rents primarily from
          on-airport, near-airport, downtown and suburban locations
          to business and leisure travelers and to individuals who
          have lost the use of their vehicles through accident,
          theft or breakdown.  In addition to revenue from vehicle
          rentals, the industry derives significant revenue from
          the sale of rental related products such as insurance,
          refueling services and collision damage waivers.

               The domestic car rental industry includes eight
          major companies, Alamo Rent-A-Car, Inc., Avis, Budget
          Rent a Car Corporation ("Budget"), Dollar Rent a Car
          Systems, Inc. ("Dollar"), Enterprise Rent a Car, The
          Hertz Corporation ("Hertz"), National Car Rental System,
          Inc., and Thrifty Rent-A-Car Systems, Inc. ("Thrifty"),
          and a large number of smaller and regional or local
          firms, serving on-airport, near-airport and other
          locations.  Most of Avis's major competitors operate
          through a combination of wholly owned and franchised
          operations.  Other smaller car rental companies operate
          primarily through franchises.

               The domestic car rental industry has experienced
          significant growth over the last decade.  The total
          annual U.S. revenue for the car rental industry has been
          estimated by industry sources at $13.5 billion in 1995,
          an 11.8% compound annual growth rate from $4.4 billion in
          1985, and the total number of rental vehicles in service
          in the United States has been estimated by industry
          sources at 1.5 million in 1995, a 7% compound annual
          growth rate from 760,000 in 1985.  The Company believes
          that the factors driving this industry growth include
          increases in airline passenger traffic due to lower
          airfares, overcapacity in the hotel industry, the trend
          toward shorter, more frequent vacations resulting from
          the growth of the number of households with two wage
          earners, the demographic trend toward older, more
          affluent Americans who travel more frequently, and
          increased business travel.  The Company believes that
          future growth of the car rental industry will be
          determined by general economic conditions, developments
          in the travel industry, and a variety of other factors,
          including the car rental industry's relationship with
          major vehicle manufacturers.  Accordingly, the Company
          cannot predict whether such growth will continue and, if
          so, whether it will continue at rates comparable to those
          of the recent past.

               Car renters generally are (i) business travelers
          renting under negotiated contractual arrangements between
          specified rental companies and the travelers' employers,
          (ii) business travelers who do not rent under negotiated
          contractual arrangements (but who may receive discounts
          through travel, professional or other organizations), and
          (iii) leisure travelers, including renters who have lost
          the use of their own vehicles through accident, theft or
          breakdown.  Contractual arrangements normally are the
          result of negotiations between rental companies and large
          corporations, based upon rates, billing and service
          arrangements, and influenced by reliability and renter
          convenience.  Business travelers who are not parties to
          negotiated contractual arrangements and leisure travelers
          generally are influenced by advertising, renter
          convenience and access to special rates because of
          membership in travel, professional and other
          organizations.

               Many of Avis's major competitors are owned by, or
          are affiliated with, the major automobile manufacturers,
          and each of the major domestic car rental companies
          maintains a close relationship with one or more United
          States automobile manufacturers.  At August 1, 1996, Ford
          Motor Company owned Hertz and had an equity interest in
          Budget; and Chrysler had equity interests in Dollar and
          Thrifty.  Automobile manufacturers often provide
          financing for the purchase of vehicles and provide
          payments to car rental companies in consideration of
          advertising and promotional programs that benefit the
          manufacturers.  In addition, manufacturers provide fleet
          assistance programs, including major vehicle
          manufacturers' repurchase programs ("Repurchase Programs
          ") and similar arrangements, which protect rental
          companies against loss on disposition of vehicles and
          enable rental companies to adjust their fleet size to
          take account of seasonal variations in demand.

          AVIS CAR RENTAL OPERATIONS

          THE AVIS SYSTEM

               System-Wide Services.  Avis provides the Avis System
          with: (i) national promotion, advertising and public
          relations services; (ii) reservations and information
          systems; (iii) data processing support; (iv) marketing
          programs with hotels and airlines; (v) a sales staff for
          marketing to corporate customers and the travel
          community; (vi) credit card services for commercial
          customers; (vii) training in local marketing techniques;
          and (viii) operation and training support.  Avis's
          on-line real-time data processing and information system,
          known as the Wizard System, connects more than 2,000 Avis
          locations in the United States, Canada, Europe and a
          number of other countries.

                    The Wizard System.  The Wizard System is a
          telecommunications and computer processing system which
          is used in the Avis System for reservations, rental
          agreement processing, accounting, fleet control and a
          variety of other purposes.  It is operated by WizCom
          International, Ltd. ("WizCom"), a wholly owned subsidiary
          of Avis.  In 1995, Budget entered into a computer
          services agreement with WizCom that provides Budget with
          certain reservation system computer services that are
          similar to computer services provided to the Avis System. 
          WizCom has also entered into agreements with hotel and
          other rental car companies to provide travel related
          reservation and distribution system services.  Avis uses
          the Wizard System as a marketing tool and benefits from
          the operating efficiencies obtained through the Wizard
          System. 

               The Wizard System is operated by Avis, and is linked
          to more than 12,000 terminals in more than 2,000 rental
          locations through telephone lines and satellite
          communications.  Among the features of the Wizard System
          which are not available on most competitors' systems are
          (a) an advanced graphical interface reservation system;
          (b) "Rapid Return," which permits customers who are
          returning cars to obtain completed charge records from
          radio-connected "Roving Rapid Return" agents who complete
          and deliver the charge record at the car as it is being
          returned; (c) "Wizard on Wheels," which enables Avis
          locations to assign cars and complete rental agreements
          while customers are being transported to the car; (d)
          "Avis Link," which automatically identifies a customer
          using American Express or other major credit card who is
          entitled to special rental rates and conditions, and
          therefore sharply reduces the number of instances in
          which Avis inadvertently fails to honor the benefits of
          negotiated rate arrangements to which they are entitled;
          (e) interactive interfaces through the airline
          computerized reservation systems described under
          "Marketing"; (f) sophisticated fleet control and revenue
          management programs which, among other things, enable
          rental agents to ensure that a customer who rents a
          particular type of vehicle will receive the available
          vehicle of that type which has the lowest mileage
          (benefitting the customer and Avis by more evenly
          dispersing utilization among cars of a particular type);
          and (g) a comprehensive control and reporting system that
          enables Avis to adapt quickly to changes in customer
          requirements.  Avis also benefits from the low cost and
          speed of billing available as a result of broad use of
          the Wizard System and believes that the Wizard System
          keeps its clerical and communications costs below those
          of its competitors.

          RENTAL OPERATIONS

               Avis rents a wide variety of automobiles and
          minivans, most of which consist of the current and
          immediately preceding model years.  Car rentals are
          generally made on a daily, weekly or monthly basis. 
          Rental charges in the United States usually are computed
          on the basis of the length of the rental or on the length
          of the rental plus a mileage charge.  Additional charges
          are made for refueling service, loss damage waivers (a
          waiver of Avis's right to make a renter pay for damage to
          the rented car), personal accident insurance, personal
          effects protection and, in some instances, additional
          liability insurance.  Rates vary at different locations
          depending on the type of vehicle, the local market and
          competitive and cost factors.  Most rentals are made
          utilizing rate plans under which the customer is
          responsible for gasoline used during the rental.  Avis
          also generally offers its customers the convenience of
          leaving a rented car at an Avis location in a city other
          than the one in which it was rented under its "Rent it
          Here -- Leave it There" program, although, consistent
          with industry practices, a drop-off charge or special
          intercity rate may be imposed.

               North American Operations.  Approximately 88% of
          Avis's United States rental revenue is generated at 174
          of the busiest airports in the United States.  Avis's
          rental revenue as a percentage of total rental revenues
          at those airports for the five-year period ended February
          29, 1996 approximated 26%; 23.7%; 24.1%; 22.3% and 23.8%,
          respectively. 

               At August 1, 1996, Avis owned and operated
          approximately 406 corporate car rental facilities at
          airport, near-airport and downtown locations throughout
          the United States and approximately 36 corporate car
          rental facilities in Canada.  Of these facilities,
          approximately 191 primarily serve airport business and
          approximately 251 are non-airport locations.  By focusing
          on travelers at the major airports, Avis has been able to
          operate more vehicles from significantly fewer rental
          sites than its competitors, yielding significant
          economies of scale.  Avis's emphasis on airport traffic
          has resulted in a strong competitive position at the
          major domestic rental-revenue airports.

               Avis has 77 independent licensees which operate
          locations in the United States.  The two largest
          licensees operate the Avis System in the Los Angeles and
          Dallas area and account for approximately half of all
          United States licensees' rentals.  Certain licensees in
          the United States pay Avis a fee equal to 5% of their
          total time and mileage charges, less all customer
          discounts, of which Avis is required to pay 40% for
          corporate licensee-related programs, while six licensees
          pay 8% of their gross revenue.  Licensees outside the
          United States normally pay higher fees.  Most of Avis's
          United States licensees currently pay 50 cents per rental
          agreement for use of the Wizard System, and they are
          charged for use of other aspects of the Wizard System. 

               Avis is in many cases one of five to seven vehicle
          concessionaires at the airports at which it operates.  In
          general, concession fees for airport locations are based
          on a percentage of total commissionable revenues (as
          determined by each airport authority), subject to a
          minimum guaranteed amount.  Concessions are typically
          awarded by airport authorities every three to five years
          based upon competitive bids.  Avis's concession
          arrangements with the various airport authorities
          generally include minimum requirements for vehicle age,
          operating hours and employee conduct, and provide for
          relocation in the event of future construction and
          abatement of fees in the event of extended low passenger
          volume.

               International Operations.  In addition to countries
          served by Avis Europe and its affiliates and licensees,
          Avis's subsidiaries, joint ventures and licensees operate
          the Avis System internationally in approximately 65
          countries and territories, with wholly owned subsidiaries
          in Canada, Argentina, Australia, New Zealand, Puerto Rico
          and the United States Virgin Islands, and joint ventures
          in Jamaica, Singapore and Malaysia.  The principal
          business of Avis's foreign subsidiaries is car rentals.

               Avis's international system (not including Avis
          Europe) operates a combined peak rental and leasing fleet
          of approximately 44,000 vehicles, of which approximately
          23,000 are operated by subsidiaries, and the balance by
          joint ventures and licensees.  Revenues of the foreign
          subsidiaries in the fiscal year ended February 29, 1996,
          totaled approximately $212 million, without taking
          account of revenues of joint ventures or licensees. 

          MARKETING

               In the United States, approximately 70% of Avis's
          fiscal 1996 rentals were generated by travelers who used
          the Avis System under contractual arrangements negotiated
          by Avis with either the travelers' corporate employers or
          organizations such as American Association of Retired
          Persons in which the travelers have memberships.  The
          remainder of the rental activity is from business
          travelers who are not affiliated with corporations or
          organizations with which Avis has contractual
          arrangements, and from leisure renters.  Avis's corporate
          sales organization is the principal source of contractual
          arrangements with corporate accounts.  Unaffiliated
          business travelers are solicited by direct mail,
          telemarketing and advertising campaigns.

               Avis solicits contractual arrangements with
          corporate accounts by emphasizing the Wizard System's
          advanced technology, customer service, pricing and a
          worldwide rental network.  The Wizard System plays a
          significant part in securing business of this type
          because the Wizard System enables Avis to offer a wide
          variety of pricing combinations, special reports and
          tracking techniques tailored to the particular needs of
          each account, and to assure adherence to agreed-upon
          rates.

               Avis's presence in the United States leisure and
          incidental business segment is substantially less
          significant than its presence in the United States
          commercial account segment.  Leisure rental activity is
          important in enabling Avis to balance the use of its
          fleet.  Typically, business renters use cars from Monday
          through Thursday, while in most areas of the United
          States leisure renters use cars primarily over weekends. 
           
               Avis maintains strong links to the air travel
          industry.  It has arrangements with American Airlines,
          America West Airlines, Continental Airlines, Delta
          Airlines, Trans World Airlines, United Airlines, USAir
          and Northwest Airlines (collectively, the "Airlines")
          under which participants in the Airlines' frequent flier
          programs can earn mileage credits whenever they rent Avis
          cars.  Frequent flier programs (under which travelers can
          earn reduced fares or free flights based upon miles flown
          on particular airlines) are a significant sales incentive
          to United States travelers, and the Company believes Avis
          benefits significantly from its frequent flier
          arrangements with the Airlines.  All the other major car
          rental companies also participate in one or more airline
          frequent flier programs. 

               Car renters can make Avis reservations through all
          four major United States based global distribution
          systems and several international based systems.  Users
          of the United States based global distribution systems
          can obtain access through these systems to the Avis
          reservation system concerning among other things, rental
          locations, vehicle availability, applicable rate
          structures and gives them the ability to reserve and
          confirm Avis vehicles directly through these systems.

               Avis also maintains strong links to the hotel
          industry.  Avis has arrangements with Hilton Corporation,
          the Hyatt Corporation and the Sheraton Marketing
          Corporation frequent traveler programs, which provide
          various incentives to all program participants.

          RENTAL VEHICLE PURCHASES

               Avis participates in a variety of vehicle purchase
          programs with major domestic and foreign manufacturers,
          although actual purchases are made directly through local
          car dealers.  The average price for automobiles purchased
          by Avis in 1996 for its rental fleet was approximately
          $16,250.00.  On average during model year 1996, 82% of
          the purchases were comprised of GM vehicles, 13% of
          Chrysler vehicles and 5% of Nissan, Subaru, Hyundai,
          Ford, Toyota and Land Rover vehicles.  These percentages
          vary among Avis's operations and will most likely change
          from year to year.  The vehicle purchase programs
          sponsored by manufacturers sometimes provide Avis with
          sales incentives for the purchase of certain models, and
          most of these programs allow Avis to serve as a drop-ship
          location for vehicles, thus enabling Avis to receive a
          fee from the manufacturers for preparing newly purchased
          vehicles for use.  There can be no assurance that Avis
          will continue to be able to benefit from sales incentives
          in the future.

               Most of Avis's cars in the United States are
          purchased, owned and sold by Prime Vehicles Trust, a
          trust created by Avis of which Avis is the sole
          beneficiary, or by corporate nominees of Prime Vehicles
          Trust.  All decisions regarding Prime Vehicles Trust
          purchases and sales of cars are made by Avis, and Prime
          Vehicles Trust is combined with Avis for both financial
          and tax accounting.  The existence of Prime Vehicles
          Trust has no effect on Avis's control of the cars in its
          fleet.  However, Avis believes the existence of Prime
          Vehicles Trust has been useful in obtaining financing
          secured by its cars.  Avis expects to continue to take
          advantage of Prime Vehicles Trust to finance future fleet
          purchases.

          FLEET UTILIZATION AND SEASONALITY

               Avis's business is subject to seasonal variations in
          customer demand, with the summer vacation period
          representing the peak season for vehicle rentals.  This
          general seasonal variation in demand, along with more
          localized changes in demand at each of Avis's operations,
          causes Avis to vary its fleet size over the course of the
          year.  In fiscal year 1996, Avis's average monthly fleet
          size ranged from a low of 127,000 vehicles in January to
          a high of 149,000 vehicles in August.  Fleet utilization,
          which is based on the average number of days vehicles are
          rented compared to the total number of days vehicles are
          available for rental, ranged from 65% in December to 82%
          in August and averaged 74% for all of fiscal year 1996.

          RENTAL VEHICLE DISPOSITION

               Avis's current operating strategy is to maintain its
          fleet at an average age of 12 months or less. 
          Approximately 90% of the vehicles purchased by Avis in
          model year 1996 were eligible for participation in
          manufacturers' Repurchase Programs.  These programs
          currently require that Avis maintain vehicles that are
          subject to the terms of manufacturers' Repurchase
          Programs ("Program Vehicles") in its fleet for a minimum
          of six months and impose numerous return conditions,
          including those related to mileage and repair condition. 
          Less than 2.5% of the Program Vehicles purchased by Avis
          and scheduled to be returned in 1995 were ineligible for
          return.  At the time of return to the manufacturer, Avis
          receives the price guaranteed at the time of purchase and
          is thus protected from fluctuations in the prices of
          previously-owned vehicles in the wholesale market at the
          time of disposition.  The future percentage of Program
          Vehicles in Avis's fleet will be dependent on the
          availability and attractiveness of the manufacturers'
          Repurchase Programs, over which Avis has no control.  

               In addition, Avis sells cars wholesale to dealers in
          the United States either through informal arrangements or
          at auction through standard consignment agreements.

          AVIS CAR RENTAL FACILITIES

               Avis leases almost all of its airport and
          non-airport car rental facilities and currently operates
          from 406 corporate rental locations.  The airport
          facilities are located on airport property owned by
          airport authorities or located near the airport on
          locations convenient for bus transport of customers to
          the airport.  One of Avis's airport facilities in each
          Avis region serves as the administrative headquarters for
          the region and, as a general rule, each airport facility
          includes vehicle storage areas, a vehicle maintenance
          facility, a car wash, a refueling station and rental and
          return facilities.  In all airport locations, the
          facility leases are not co-terminus with the local
          airport concession agreement.  Avis's non-airport
          facilities generally consist of a limited parking
          facility and a rental and return desk and are generally
          subject to long-term leases with renewal options. 
          Certain of these leases also have purchase options at the
          end of their terms. 

          INSURANCE

               Avis generally assumes the risk of liability to
          third parties in the United States for up to $1 million
          per occurrence.  It has purchased significant excess
          insurance coverage against risks which exceed $1 million
          per occurrence.  One of the benefits of Avis's retaining
          the risk up to $1 million per occurrence is that Avis
          maintains its own claims department, which controls the
          disposition of most claims.  The Company believes that
          the maintenance by Avis of its own claims department in
          recent years has helped contain Avis's cost of claims
          paid. 

               Under its standard car rental contract, Avis
          provides its renters liability coverage up to the minimum
          financial responsibility limits required by applicable
          law.  Higher limits are provided by separate agreement to
          some United States national corporate accounts and Avis
          makes available to renters, for an additional daily
          charge, participation in a group policy underwritten by a
          major national insurer which increases renters' coverage
          to one million dollars.  Avis also offers renters, for
          additional daily charges, "Personal Accident Insurance,"
          which pays medical expenses and accidental death benefits
          for accidents during the rental period, and "Personal
          Effects Protection," which ensures against loss or damage
          to the renters' personal belongings during the rental
          period.  Both these coverages are underwritten by major
          national insurers.

          REGULATORY AND ENVIRONMENTAL MATTERS

               Avis is subject to federal, state and local laws and
          regulations including those relating to taxing and
          licensing of vehicles, franchising, consumer credit,
          environmental protection, retail vehicle sales and labor
          matters.  The principal environmental regulatory
          requirements applicable to Avis's operations relate to
          the ownership or use of tanks for the storage of
          petroleum products, such as gasoline, diesel fuel and
          waste oils; the treatment or discharge of waste waters;
          and the generation, storage, transportation and off-site
          treatment or disposal of solid or liquid wastes.  Avis
          operates 232 domestic and international locations at
          which petroleum products are stored in underground or
          aboveground tanks.  Avis has instituted an environmental
          compliance program designed to ensure that these tanks
          are in compliance with applicable technical and
          operational requirements, including the replacement of
          underground steel tanks and periodic integrity testing of
          underground storage tanks.  The Company believes that the
          locations where Avis currently operates are in
          compliance, in all material respects, with such
          regulatory requirements. 

               Avis may also be subject to requirements related to
          the remediation of, or the liability for remediation of,
          substances that have been released to the environment at
          properties owned or operated by Avis or at properties to
          which Avis sends substances for treatment or disposal. 
          Such remediation requirements may be imposed without
          regard to fault and liability for environmental
          remediation can be substantial.

               Avis may be eligible for reimbursement or payment of
          remediation costs associated with future releases from
          its regulated underground storage tanks.  Certain of the
          states in which Avis maintains underground storage tanks
          have established funds to assist in the payment of
          remediation costs for releases from certain registered
          underground tanks.  Subject to certain deductibles, the
          availability of funds, compliance status of the tanks and
          the nature of the release, these tank funds may be
          available to Avis for use in remediating future releases
          from its tank systems. 

               A traditional revenue source for the car rental
          industry has been the sale of loss damage waivers, by
          which car rental companies agree to relieve a customer
          from financial responsibility arising from vehicle damage
          to the rented car incurred during the rental period. 
          Approximately 3% of Avis's rental revenue during 1995 was
          generated by the sale of loss damage waivers.  The U.S.
          House of Representatives has from time to time considered
          legislation that would regulate the conditions under
          which loss damage waivers may be sold by car rental
          companies.  House Bill H.R. 175, introduced in January
          1995, seeks to prohibit the imposition of liability on
          renters for loss of, or damage to, rented vehicles,
          except in certain circumstances, and would prohibit the
          sale of loss damage waivers.  To date, no action has been
          taken on this bill.  In addition, approximately 40 states
          have considered legislation affecting the sale of loss
          damage waivers.  To date, 24 states have enacted
          legislation which regulates the sale of loss damage
          waivers, most of which requires disclosure to each
          customer at the time of rental that damage to the rented
          vehicle may be covered by the customer's personal
          automobile insurance and that loss damage waivers may not
          be necessary.  In addition, in the late 1980's, New York
          and Illinois enacted legislation which eliminated Avis's
          right to offer loss damage waivers for sale and limited
          potential customer liability to $100 and $200,
          respectively.  Moreover, California, Nevada and Indiana
          have capped rates that may be charged for collision
          damage waivers to $9.00, $10.00 and $5.00 per day,
          respectively.  Texas requires that the rate charged for
          loss damage waivers be reasonably related to the direct
          cost of the repairs.  Adoption of national or additional
          state legislation eliminating or limiting the sale of
          loss damage waivers could result in the loss or reduction
          of this revenue source and additional limitations on
          potential customers liability could increase Avis's
          costs. 

          LEGAL MATTERS

               From time to time, Avis is subject to routine
          litigation incidental to its business.  Avis maintains
          insurance policies that cover most of the actions brought
          against Avis.  See "-- Insurance." Avis is currently not
          involved in any legal proceeding which it believes would
          have a material adverse effect upon its financial
          condition or operations.

          EMPLOYEES

               Avis has more than 20,000 employees worldwide.  Of
          these, approximately 375 are employed in executive,
          financial and administrative capacities, approximately
          240 are engaged in marketing or sales capacities,
          approximately 460 are involved in system design and
          constant upgrading of the Wizard System, approximately
          700 are engaged in clerical activities in connection with
          the administration of Avis and the balance are engaged in
          car rentals and car care at rental locations. 
          Approximately 20% of Avis's employees are represented by
          65 various local unions under contracts expiring on a
          variety of dates.  No local union represents more than
          2.5% of Avis's employees.  Avis believes its
          relationships with its employees are good.

          PROPERTIES

               Avis leases or has concessions relating to space at
          707 locations in the United States and 117 locations
          outside the United States for all of its operations.  Of
          those locations, 182 in the United States and 47 outside
          the United States are at airports.  Additionally, 38
          locations in the United States are owned and three
          locations outside the United States are owned. 
          Typically, an airport receives a percentage of car rental
          revenues, with a guaranteed minimum.  Because there is a
          limit to the number of car rental locations in an
          airport, car rental companies frequently bid for the
          available locations, usually on the basis of the size of
          the guaranteed minimums.  Avis and other car rental firms
          also rent parking space on or near airports and at their
          other car rental locations.

               Avis's principal offices are in a 405,000 square
          foot complex in Garden City, New York, for which Avis
          currently pays approximately $875,000 per year under a
          lease which, by exercising renewal options, has been
          extended to 2015.  The Avis reservation system is run
          from leased space in Tulsa, Oklahoma.  Avis also
          maintains terminal network facilities which it uses in
          connection with the Wizard System in Garden City, Tulsa,
          San Francisco, California and Bracknell, England.  Avis
          also owns a 166,000 square foot building in Virginia
          Beach, Virginia which serves as a satellite
          administrative and reservation facility.

          CERTAIN PROVISIONS OF THE AVIS ACQUISITION AGREEMENTS 

               HFS has certain continuing obligations under the
          Stock Purchase Agreement and the Merger Agreement (each
          as defined below) entered into in connection with the
          Avis Acquisition relating to potential post-closing
          payments to be made under such agreements.  The following
          is a brief summary of those obligations, and does not
          purport to be complete and is subject to, and qualified
          in its entirety by reference to, such agreements, which
          are exhibits hereto and are incorporated by reference
          herein.  

               In connection with the Avis Acquisition, General
          Motors Corporation ("GM") received 1,340,898 shares (the
          "GM Shares") of HFS common stock (the "HFS Common
          Stock").  Pursuant to the Stock Purchase Agreement, dated
          as of August 28, 1996, between HFS and GM as amended by
          the letter agreement, dated December 13, 1996 (together,
          the "Stock Purchase Agreement"), GM will be entitled to
          receive cash equal to the amount by which $99,311,000
          (the value attributable under the Stock Purchase
          Agreement to the HFS Common Stock received by GM in the
          Avis Acquisition) exceeds the proceeds realized upon the
          subsequent sale of such HFS Common Stock (deeming all HFS
          Common Stock received by GM and not sold prior to January
          31, 1997 to have been sold on January 31, 1997). HFS
          shall also pay to GM interest, on a pre-determined value
          of $74.063 for each of the 1,067,398 shares of HFS Common
          Stock held by GM on December 13, 1996, at a rate of LIBOR
          plus 100 basis points, which interest shall accrue from
          November 17, 1996 to, but not including, the date of sale
          of such shares or January 31, 1997, in the case of any GM
          Shares not sold prior to January 31, 1997.  The payments
          described above shall be made no later than February 7,
          1997.

               The letter agreement is attached hereto as Exhibit
          99.3 and is incorporated herein by reference.

               In connection with the Avis Acquisition, the Avis,
          Inc. Employee Stock Ownership Plan (the "Avis ESOP")
          received from HFS 3,187,421 shares of HFS Common Stock
          (the "ESOP Shares").  Pursuant to the Agreement and Plan
          of Merger, dated as of August 23, 1996, as amended, by
          and among HFS, Avis Acquisition Corp., U.S. Trust Company
          of California, N.A., as Trustee and Avis (the "Merger
          Agreement"), the Avis ESOP will be entitled to receive
          cash in an amount equal to the "Post-Closing
          Consideration."  The "Post-Closing Consideration" shall
          equal $337 million, plus interest thereon at the rate
          prescribed in the Merger Agreement, less the proceeds
          received by the Avis ESOP upon any sale of ESOP Shares
          and the value of the ESOP Shares based upon any deemed
          sale of such shares as provided for in the Merger
          Agreement, and less interest on such proceeds and deemed
          sale proceeds at the rate prescribed in the Merger
          Agreement; provided, that in no event shall the Post-
          Closing Consideration exceed $370.7 million.  Payment of
          the Post-Closing Consideration, if any, will be made not
          later than October 22, 1997.

          ii)  THE RCI ACQUISITION

          GENERAL

               On November 12, 1996, the Company completed the
          acquisition of all the outstanding capital stock of RCI
          and its affiliates for approximately $625 million,
          comprised of $550 million in cash and $75 million in
          Common Stock of the Company, plus future contingent
          payments of up to $200 million over the next five years.

               RCI, based in Indianapolis, Indiana and incorporated
          as an Indiana corporation in 1974, is the world's largest
          provider of timeshare exchange programs for approximately
          two million timeshare owners and approximately 3,000
          resorts around the world.  The RCI Network enables a
          member who owns a timeshare interest in a resort property
          that is affiliated with the RCI Network to exchange such
          timeshare interest for a timeshare interest of equivalent
          value in another affiliated resort.  RCI also is engaged
          in publishing related to the timeshare industry and
          provides other travel-related services, integrated
          software systems and resort management and consulting
          services.  Exchange and travel-related revenue of RCI was
          $158.6 million and $278.1 million for the six months
          ended June 30, 1996 and the year ended December 31, 1995,
          respectively.

               The Company expects that the acquisition of RCI will
          provide increased  marketing opportunities between RCI
          and the Company's lodging, car rental and real estate
          brokerage products as well as further opportunities to
          expand the  Company's preferred vendor program.  The
          Company also expects that RCI will  benefit from certain
          economies of scale and other synergies resulting from 
          RCI's affiliation with the Company's lodging, car rental
          and real estate brokerage franchisor operations.

          TIMESHARE EXCHANGE INDUSTRY OVERVIEW

               Timesharing for the resort industry is the shared
          ownership and/or periodic use of property by a number of
          users or owners for a defined period of years or in
          perpetuity.  An example of a simple form of timeshare is
          a condominium unit that is owned by fifty-two persons,
          with each person having the right to use the unit for one
          week of every year.  In the United States, industry
          sources estimate that the average price of such a
          timeshare is about $7,500 to $10,000, plus a yearly
          maintenance fee of approximately $350.  In 1995, sales of
          timeshares exceeded $5 billion worldwide.  Approximately
          52% of all timeshare owners reside in the United States,
          while approximately 21% reside in Europe.  Industry
          sources have estimated that the total number of owners of
          timeshare interests is approximately 3.5 million, while
          the total number of timeshare resorts worldwide has been
          estimated to be approximately 4,500.

               A timeshare exchange provides an owner of a
          timeshare interest in a particular resort property with
          the ability to exchange such interest for a timeshare
          interest of equivalent value in another resort. 
          Timeshare exchange accounts for approximately two-fifths
          of the timeshare holidays taken worldwide each year.  Two
          principal segments make up the timeshare exchange
          industry: owners of timeshare interests and resort
          properties.  The timeshare exchange industry derives
          revenue from annual membership fees paid by owners of
          timeshare interests, affiliation fees paid by timeshare
          resort properties, and exchange fees paid by such owners
          for each exchange that is arranged by a timeshare
          exchange company.

               The global timeshare exchange industry consists of
          two major companies, RCI and Interval International
          ("Interval"), a wholly-owned subsidiary of CUC
          International, as well as a small number of smaller
          firms.  Approximately 95% of the 4,500 timeshare resorts
          in the world are affiliated with either RCI or with
          Interval.  In addition, RCI has approximately 2.1 million
          timeshare owners who are members while Interval has
          almost 700,000 timeshare owners who are members.

               The timeshare industry has experienced significant
          growth over the past decade.  The Company believes that
          the factors driving this industry growth include the
          demographic trend toward older, more affluent Americans
          who travel more frequently, the entrance of major
          hospitality and entertainment companies into timeshare
          development, a worldwide acceptance of the concept, an
          increasing focus on leisure activities, family health and
          a desire for value, variety and flexibility in a vacation
          experience.  The Company believes that future growth of
          the timeshare exchange industry will be determined by
          general economic conditions both in the U.S. and
          worldwide, the public image of the industry, improving
          approaches to providing marketing and sales, a greater
          variety of products and broadening the timeshare market
          and a variety of other factors.  Accordingly, the Company
          cannot predict whether such growth will continue and, if
          so, whether it will continue at rates comparable to those
          of the recent past.  

          RCI TIMESHARE EXCHANGE OPERATIONS

          MEMBERSHIP

               The RCI Network provides a network for approximately
          2.1 million members who own timeshare interests in a
          resort that is affiliated with the RCI Network which
          enables such members to exchange their timeshare interest
          for a timeshare interest of equivalent value in another
          affiliated resort.  Approximately 1,100,000 members of
          the RCI Network reside outside of the United States,
          which account for 52% of the total members of the RCI
          Network.  RCI's membership volume has grown at a compound
          annual rate for the last five years of approximately 10%,
          while exchange volumes have grown at a compound annual
          rate of approximately 12% for the same time period.

               RCI provides members of the RCI Network with access
          to both domestic international timeshare resorts,
          publications regarding timeshare exchange opportunities,
          and other travel-related services, including discounted
          purchasing programs.  See "--Publications" and "--Other
          Services Provided by RCI." In the United States, members
          pay an average annual membership fee of $67 as well as an
          average exchange fee of $100 for every exchange arranged
          by RCI.  In 1995, membership and exchange fees amounted
          to approximately $230 million.  RCI arranged
          approximately 1.6 million exchanges in 1995.

               Developers of resorts affiliated with the RCI
          Network typically pay the first year membership fee for
          new members upon the sale of the timeshare interest.  See
          "--Affiliated Timeshare Resorts and Developers."  In the
          United States more than 75% of such owners renew their
          membership in their second year and more than 90% renew
          each year thereafter.

          OTHER SERVICES PROVIDED BY RCI

               Travel Services.  RCI provides travel services to
          U.S. members of the RCI Network through its affiliate,
          RCI Travel, Inc. ("RCIT").  On a global basis, RCI
          provides travel services through entities operating in
          local jurisdictions (hereinafter, RCIT and local entities
          referred to as "Travel Agencies").  Travel Agencies
          provide airline reservations and airline ticket sales
          services to members in conjunction with the arrangement
          of their timeshare exchanges, as well as providing other
          types of travel services including hotel accommodations,
          car rentals, cruises and tours.  Travel Agencies also
          from time to time offer travel packages utilizing resort
          developers' unsold inventory to provide both revenue and
          prospective timeshare purchasers to the resort.

               Advertising.  RCI provides its affiliated resorts
          with advertising opportunities in its member and
          developer focused publications, as well as through its
          site on the Internet Worldwide Web at http:\\www.rci.com.

               Sales and Marketing Supporting.  RCI provides a wide
          variety of sales and marketing materials to assist its
          affiliated resorts in their timeshare sales process. 
          These include a video explaining the concept of vacation
          ownership and exchange, posters, wall tours customized
          for the resort, a wide variety of promotional brochures
          and the Endless Vacation Special Resort Edition
          Directory.  Interactive multi-media sales tools are also
          under development.  In addition, RCI uses
          state-of-the-art database marketing techniques to
          identify highly qualified sales prospects for its resort
          affiliates.

               Timeshare Consulting.  RCI provides worldwide
          timeshare consulting services through its affiliate, RCI
          Consulting, Inc.  These services include comprehensive
          market research, site selection, strategic planning,
          community economic impact studies, resort concept
          evaluation, financial feasibility assessments, on-site
          studies of existing resort developments, and tailored
          sales and marketing plans.

               Resort Management Software.  RCI provides computer
          software systems to timeshare resorts and developers
          through its affiliate, Resort Computer Corporation
          ("RCC").  RCC provides software that integrates resort
          functions such as sales, accounting, inventory,
          maintenance, dues and reservations.

               Property Management.  RCI provides resort property
          management services through its affiliate, RCI
          Management, Inc. ("RCIM").  RCIM is a single source for
          any and all resort management services, and offers a menu
          including hospitality services, a centralized
          reservations service center, advanced reservations
          technology, human resources expertise and owner's
          association administration.

          AFFILIATED TIMESHARE RESORTS AND DEVELOPERS

               Approximately 3,000 timeshare resorts are affiliated
          with the RCI Network, of which approximately 1,250
          resorts are located in the United States and Canada;
          1,100 are in Europe and Africa, 400 are in Mexico and
          Latin America, and 250 are in the Asia-Pacific region. 
          The terms of RCI's affiliation agreement with its resorts
          generally require that the developer enroll each new
          timeshare purchaser at the resort as a member of RCI,
          license the affiliated resort to use the RCI name and
          marks, set forth the materials and services RCI will
          provide to the affiliate and generally describe RCI's
          expectations of the resort's management, representation
          of the exchange program, minimum enrollment requirements
          and treatment of exchange guests.  Affiliation agreements
          are typically for a term of five or six years and
          automatically renew for like terms thereafter unless
          either party takes affirmative action to terminate the
          relationship.  RCI makes available a wide variety of
          goods and services to its affiliated developers,
          including publications, advertising, sales and marketing
          materials, timeshare consulting services, resort
          management software, travel packaging and property
          management services.  See "--Other Services Provided by
          RCI."

               Developers of affiliated resorts typically pay the
          first year membership fee for new members upon the sale
          of the timeshare interest.  Vistana Development, Orange
          Lake Country Club and Fairfield Communities have provided
          the greatest number of members currently enrolled in the
          RCI Network.

          PUBLICATIONS

               RCI publishes numerous magazines and periodicals,
          often in several languages, relating to the vacation and
          timeshare industry.  The Endless Vacation Special Resort
          Edition, and its counterpart in various countries, is
          RCI's premier publication and contains full color, photo
          listings of RCI resorts.  Endless Vacation, Holiday, and
          Vacacciones Sin Fin are magazines directed at subscribing
          members in North America and Singapore, Europe and
          Africa, and Latin America, respectively.  Perspective,
          Review, Timeshare Business Quarterly and Intercambio are
          magazines or newsletters directed at resort affiliates,
          developers, homeowners associations and industry
          personnel in North America, Europe, Asia-Pacific and
          Latin America, respectively.  RCI's approximately 2.1
          million members are subscribers to its magazines. 
          Developer periodicals are made available to resorts and
          others in the industry at no charge.

          REGULATORY AND ENVIRONMENTAL MATTERS

               RCI is subject to federal, state and local laws and
          regulations including those relating to taxing, consumer
          credit, environmental protection and labor matters.  In
          addition, RCI is subject to state statutes in those
          states regulating timeshare exchange services, and must
          prepare and file annually with regulators in states which
          require it, the RCI Disclosure Guide to Vacation
          Exchange.  RCI is not subject to those state statutes
          governing the development of timeshare condominium units
          and the sale of timeshare interests, but such statutes
          directly affect the members and resorts that participate
          in the RCI Network and therefor the statutes indirectly
          impact RCI.

               The Company believes that RCI is in substantial
          compliance with all of the regulatory requirements of the
          various jurisdictions in which RCI operates.

          LEGAL MATTERS

               From time to time, RCI is subject to routine
          litigation incidental to its business.  RCI maintains
          insurance policies that cover most of the actions brought
          against RCI.  RCI is not involved in any legal proceeding
          which it believes would have a material adverse effect
          upon its financial condition or operations.

          EMPLOYEES

               RCI has approximately 4,200 employees worldwide.  Of
          these, approximately 1,500 are employed in executive,
          financial and administrative capacities, approximately
          1,800 are engaged in marketing or sales capacities,
          approximately 325 are involved in the travel services
          business, approximately 70 are involved in the resort
          software business, and approximately 500 are involved in
          the resort-management business.  None of RCI's employees
          are represented by unions or collective bargaining
          agreements.  RCI believes that its relationships with its
          employees are good.

          PROPERTIES

               RCI leases space at 18 locations in the United
          States and 32 locations outside of the United States for
          all of its operations.  Additionally, one location in the
          United States is owned and four locations outside of the
          United States are owned.  RCI has offices in 33
          countries.

               RCI's principal offices are in a 108,000 square foot
          complex known as the Woodview Trace building, located in
          Indianapolis, Indiana.  RCI leases the land and building
          from a limited liability company controlled by a director
          of HFS.  The lease provides for an initial five year term
          expiring December 31, 2001 and contains ten renewal
          options each for a term of five additional years.  The
          rent is approximately $1,600,000 per year for the
          original term of the lease, and is subject to adjustment
          to reflect changes in the cost of living upon the
          exercise of each renewal option.

          B.   OTHER

               On November 26, 1996, Amre Inc. ("Amre") reached an
          agreement in principle with the Company to defer $9.6
          million of Amre's 1996 royalty obligation to the Company
          and modify the $11 million 1997 royalty payment to the
          Company so that such royalty is based on the cash flow of
          Amre.  The Company and Amre also agreed to restructure
          the terms of future royalty payments.

               The Company will record an allowance in the fourth
          quarter of 1996 on the $9.6 million receivable from Amre. 
          The allowance will be offset in large part by a $9.5
          million fee from Chartwell Leisure Inc. ("Chartwell")
          related to a termination of a services contract by
          Chartwell.

          Item 7.   Financial Statements, Pro Forma Financial
                    Information and Exhibits

               (c)  Exhibits

                    99.1 Stock Purchase Agreement (incorporated by
                         reference to Exhibit 2.2 to the Company's
                         Registration Statement on Form S-3 (Reg.
                         No. 333-11029), filed with the Securities
                         and Exchange Commission on August 29,
                         1996).

                    99.2 Merger Agreement (incorporated by
                         reference to Exhibit 2.1 to the Company's
                         Registration Statement on Form S-3 (Reg.
                         No. 333-11029), filed with the Securities
                         and Exchange Commission on August 29,
                         1996).

                    99.3 Letter Agreement, dated December 13, 1996,
                         between the Company and GM.

                    99.4 Agreement, dated as of September 11, 1996,
                         by and among the Company, Avis Acquisition
                         Corp., U.S. Trust Company of California,
                         N.A. and Avis.

                    99.5 Agreement, dated as of September 19, 1996,
                         by and among the Company, Avis Acquisition
                         Corp., U.S. Trust Company of California,
                         N.A. and Avis.

                    99.6 News Release, dated November 26, 1996.

                                  SIGNATURES

                    Pursuant to the requirements of the Securities
          Exchange Act of 1934, the registrant has duly caused this
          report to be signed on its behalf by the undersigned
          hereunto duly authorized.

                                   HFS INCORPORATED

                                   By: /s/ James E. Buckman     
                                      --------------------------
                                      James E. Buckman
                                      Executive Vice President
                                      and General Counsel

          Date:  December 24, 1996

                                EXHIBIT INDEX

                    99.1 Stock Purchase Agreement (incorporated by
                         reference to Exhibit 2.2 to the Company's
                         Registration Statement on Form S-3 (Reg.
                         No. 333-11029), filed with the Securities
                         and Exchange Commission on August 29,
                         1996).

                    99.2 Merger Agreement (incorporated by
                         reference to Exhibit 2.1 to the Company's
                         Registration Statement on Form S-3 (Reg.
                         No. 333-11029), filed with the Securities
                         and Exchange Commission on August 29,
                         1996).

                    99.3 Letter Agreement, dated December 13, 1996,
                         between the Company and GM.

                    99.4 Agreement, dated as of September 11, 1996,
                         by and among the Company, Avis Acquisition
                         Corp., U.S. Trust Company of California,
                         N.A. and Avis.

                    99.5 Agreement, dated as of September 19, 1996,
                         by and among the Company, Avis Acquisition
                         Corp., U.S. Trust Company of California,
                         N.A. and Avis.

                    99.6 News Release, dated November 26, 1996.