FelCor Lodging Trust Q1 2010 Net Loss Widens

$72.1 million Compared to Net Loss of $30.7 million

. May 05, 2010

IRVING, TX - May 3, 2010 - FelCor Lodging Trust Incorporated (NYSE: FCH) today reported operating results for the first quarter ended March 31, 2010.

Summary:

Today, we closed a $212 million mortgage loan secured by nine hotels. Proceeds were used to repay six mortgage loans totaling $210 million that were secured by 11 hotels (we unencumbered two hotels) and were scheduled to mature in May.
Adjusted EBITDA was $38.5 million for the quarter, which was significantly better than internal expectations. Adjusted FFO per share was $(0.17) for the quarter. These were $5 million and $0.08 better than analysts' original estimates.

= RevPAR at our 83 consolidated hotels decreased only 0.5% for the quarter, compared to a 2.1% decline nationally. Our portfolio continues to gain market share.
Hotel EBITDA margin decreased only 177 basis points for the quarter. Positive flow-through on the improvement to budgeted revenue was 63%, notwithstanding the improvement in revenue was from increased occupancy.
Net loss for the quarter was $62.9 million.

First Quarter Operating Results:

Revenue per available room (“RevPAR”) for our 83 consolidated hotels was $82.87, a 0.5% decline compared to the same period in 2009, which was better than the 2.1% decline for the industry (according to Smith Travel Research) and better than our hotels' competitive sets. Our slight RevPAR decline was driven by a 7.9% increase in occupancy to 67.9%, but offset by a 7.8% decline in average daily rate (“ADR”) to $122.06, compared to the same period in 2009. Occupancy increased at 65 of our hotels during the quarter. Market share in the quarter for our portfolio continued to improve. RevPAR for our 83 consolidated hotels increased 4.9% during March, compared to prior year, as occupancy increased 11.3%. Additionally, the rate decline improved in March relative to the quarter.

“The pace of the recovery in the lodging industry has been more robust than anticipated, leading to much stronger than expected RevPAR. The corporate transient, leisure and group segments are improving. Importantly, occupancy gains were strong throughout the week, led by Tuesday and Wednesday, and corporate transient room nights increased 7% during the quarter. Although corporate transient and group occupancies have begun to grow, our visibility into future trends remains somewhat limited, and booking windows are exceptionally short. Therefore, we remain intently focused on gaining market share and optimizing the mix of business to maximize rates,” said Richard A. Smith, FelCor's President and Chief Executive Officer.

“As the recovery takes hold, we will continue to benefit from our diversified, high-quality portfolio which should continue to outperform the industry. We now have completed our near-term balance sheet initiatives and are well-positioned to benefit from a broad economic recovery. We are ready to take advantage of opportunities to augment growth and continue to seek ways to increase shareholder value,” added Mr. Smith.

Hotel EBITDA for the quarter was $51.0 million, compared to $55.5 million for the same period in 2009. Hotel EBITDA margin was 22.6%, a 177 basis point decrease compared to 2009. Positive flow-through on the improvement to budgeted revenue was 63%, notwithstanding the improvement in revenue was from increased occupancy. Hotel EBITDA represents EBITDA generated by our 83 consolidated hotels prior to corporate expenses and joint venture adjustments.

Adjusted EBITDA for the quarter was $38.5 million, compared to $47.4 million in 2009. Adjusted EBITDA in the prior year period includes EBITDA from hotels sold in 2009.

Adjusted funds from operations (“FFO”) for the quarter was $(10.6) million, or $(0.17) per share, compared to $13.8 million, or $0.22 per share, in 2009. The change in Adjusted FFO is largely attributed to a $14.9 million increase in interest expense, compared to 2009.

Net loss attributable to common stockholders for the quarter was $72.1 million, or $1.14 per share, compared to a net loss of $30.7 million, or $0.49 per share, for 2009. Net loss in the current year included a $21.1 million impairment charge related to two hotels that we expect to transfer to the lenders in satisfaction of the related debt.

EBITDA, Adjusted EBITDA, Same Store Adjusted EBITDA, Hotel EBITDA, Hotel EBITDA margin, FFO, Adjusted FFO and Same-Store Adjusted FFO are all non-GAAP financial measures. See our discussion of “Non-GAAP Financial Measures” beginning on page 14 for a reconciliation of each of these measures to the most comparable GAAP financial measure and for information regarding the use, limitations and importance of these non-GAAP financial measures.

Balance Sheet:

At March 31, 2010, we had $1.77 billion of consolidated debt outstanding, with a weighted average interest rate of 7.28%, and $276 million of cash and cash equivalents.

Today, we entered into a new $212 million loan, secured by nine hotels, that matures in 2015. The new loan bears interest at LIBOR (subject to a 3.0% floor) plus 5.1%. The proceeds were used to repay $210 million in loans that were secured by 11 hotels and were scheduled to mature in May. With this financing, we resolved all of our remaining 2010 debt maturities on terms that are significantly more favorable than the debt it refinanced, and we were able to unencumber two previously mortgaged hotels. Two remaining loans (totaling $32 million) mature in May 2010. The cash flows for the hotels that secure those loans do not cover debt service, and we stopped funding the shortfalls in December 2009. We have been unable to negotiate an acceptable debt modification or reduction that made sense for our stockholders with regard to these loans. Therefore, these two hotels will be transferred to the lenders in full satisfaction of the debt.

“We are very pleased with the successful refinancing of our near-term debt maturities. Our efforts are complete, as we have now resolved all of our remaining 2010 maturities. The most recent refinancing improves our balance sheet by lowering our average interest rate and providing us with two additional unencumbered hotels. We will continue to look for additional opportunities to strengthen our balance sheet as the capital markets improve,” said Andrew J. Welch, FelCor's Executive Vice President and Chief Financial Officer.

Portfolio Management:

For the quarter ended March 31, 2010, we spent $8.6 million on capital expenditures at our hotels (including our pro rata share of joint venture expenditures).

During the quarter, we sold the Holiday Inn Express in Salina, Kansas for $3.7 million. This hotel was part of an unconsolidated joint venture that involved three other hotels located in Kansas, all of which have been sold.

Outlook:

The pace of the recovery in the lodging industry has increased, reflecting improved corporate transient and group demand. Recent economic data indicates that demand will continue to improve as the capital markets, business activity and consumer confidence improve. Although occupancy is recovering, our hotels still have not achieved sufficient compression to begin widespread changes in the customer mix, which are necessary to boost rates. Therefore, ADR remains below prior year levels. Although we continue to implement strict cost controls, higher occupancy and lower rates will impact operating margins.

We expect our portfolio RevPAR to outperform the industry as a result of our high-quality, renovated portfolio. Additionally, our hotels are relatively less affected by new supply growth because the average number of rooms under construction in our markets is 28% lower than the industry.

For 2010 we anticipate:

RevPAR to increase between 0% and 3%;
Adjusted EBITDA to be between $166 million and $177 million;
Adjusted FFO per share to be between $(0.47) and $(0.30);
Net loss to be between $157 million and $146 million; and
Interest expense to be approximately $151 million.

FelCor, a real estate investment trust, is the nation's largest owner of upper-upscale, all-suite hotels. FelCor owns interests in 84 hotels and resorts, located in 23 states and Canada. FelCor's portfolio consists primarily of upper-upscale hotels, which are flagged under global brands - Embassy Suites Hotels®, Doubletree ®, Hilton®, Marriott®, Renaissance®, Sheraton®, Westin® and Holiday Inn®. Additional information can be found on the Company's Web site at www.felcor.com.

We invite you to listen to our first quarter earnings Conference Call on Tuesday, May 4, 2010, at 11:00 a.m. (Central Time). The conference call will be Web cast simultaneously via the Internet on FelCor's Web site at www.felcor.com. Interested investors and other parties who wish to access the call should go to FelCor's Web site and click on the conference call microphone icon on either the “Investor Relations” or “News Releases” page. The conference call replay will be archived on the Company's Web site.

With the exception of historical information, the matters discussed in this news release include “forward-looking statements” within the meaning of the federal securities laws. These forward-looking statements are identified by their use of terms and phrases such as “anticipate,” “believe,” “could,” “estimate,” “expect,” “intend,” “may,” “plan,” “predict,” “project,” “should,” “will,” “continue” and other similar terms and phrases, including references to assumptions and forecasts of future results. Forward-looking statements are not guarantees of future performance. Numerous risks and uncertainties, and the occurrence of future events, may cause actual results to differ materially from those anticipated at the time the forward-looking statements are made. Current economic circumstances or a further economic slowdown and the impact on the lodging industry, operating risks associated with the hotel business, relationships with our property managers, risks associated with our level of indebtedness and our ability to meet debt covenants in our debt agreements, our ability to complete acquisitions, dispositions and debt refinancing, the availability of capital, the impact on the travel industry from increased fuel prices and security precautions, our ability to continue to qualify as a Real Estate Investment Trust for federal income tax purposes and numerous other factors may affect future results, performance and achievements. Certain of these risks and uncertainties are described in greater detail in our filings with the Securities and Exchange Commission. Although we believe our current expectations to be based upon reasonable assumptions, we can give no assurance that our expectations will be attained or that actual results will not differ materially. We undertake no obligation to update any forward-looking statement to conform the statement to actual results or changes in our expectations.

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