FelCor Lodging Trust (FCH) 8-K FELCOR EXCEEDS SECOND QUARTER GUIDANCE •Raises Full Year Outlook

FelCor Loadging Trust Incorporated
545 E. John Carpenter Freeway, Suite 1300
Irving, Texas 75062-3933
P   972.444.4900  F  972.444.4949
www.felcor.com  NYSE: FCH



Exhibit 99.1          

For Immediate Release:

FELCOR EXCEEDS SECOND QUARTER GUIDANCE
•Raises Full Year Outlook

          IRVING, Texas...August 3, 2005-FelCor Lodging Trust Incorporated (NYSE: FCH), one of the nation’s largest hotel real estate investment trusts (REITs), today reported operating results for the second quarter and six months ended June 30, 2005.

Highlights:

Second Quarter Results:

• Same-Store EBITDA increased to $80 million in the second quarter of 2005, from $68 million in the same period of 2004, a 17 percent increase. Adjusted EBITDA grew from $73 million in the second quarter of 2004 to $81 million in the second quarter of 2005, and exceeded the high end of our guidance.

• Adjusted FFO was $34 million, compared to $22 million for the same period last year. Adjusted FFO per share was $0.54, compared to $0.35 for the same period last year, an increase of 54 percent. Adjusted FFO for the second quarter exceeded our previous guidance of $0.49 to $0.52 per share.

• Net loss applicable to common stockholders was $5 million, or a net loss of $0.08 per share, compared to the prior year second quarter net loss of $41 million, or $0.69 per share.

• Revenue per available room (“RevPAR”) for the quarter increased 9.6 percent, compared to the same period in 2004, exceeding our second quarter forecast RevPAR growth of between six and seven percent. Average daily rate (“ADR”) made up 59 percent of our RevPAR growth for the quarter.

• Hotel operating profit increased to $75 million for the quarter, compared to $66 million in the prior year period, an increase of 14 percent. Hotel operating profit margin during the quarter was 23.1 percent, an increase of 130 basis points over the 21.8 percent margin last year.

Year to Date Results:

• Same-Store EBITDA increased to $142 million in the first half of 2005, from $124 million, a 15 percent increase, for the six month period ended June 30, 2004. Adjusted EBITDA grew from $132 million in the first six months of 2004 to $143 million in the first six months of 2005.

• Adjusted FFO for the year-to-date period was $50 million, compared to $30 million for the same period last year and Adjusted FFO per share was $0.79 for the current period, compared to $0.49 for the same period last year, an increase of 61 percent.

• Net loss applicable to common stockholders was $23 million, or a net loss of $0.38 per share, compared to the prior year six month net loss of $68 million, or $1.15 per share.

• RevPAR for the six months increased 8.2 percent, compared to the same period in 2004. ADR made up 70 percent of our RevPAR growth for the period.

• Hotel operating profit increased to $135 million for the first six months, compared to $119 million in the prior year period, an increase of 13 percent. Hotel operating profit margin during the six months was 21.7 percent, an increase of 120 basis points over the 20.5 percent margin during the first half of last year.

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FelCor Lodging Trust Second Quarter 2005 Operating Results
August 3, 2005
Page 2

           “Although a number of our key markets have recovered, other markets are just beginning to recover and are starting to show strong growth this year. Coupled with our portfolio repositioning, the recovery in many of our key markets has enabled our RevPAR growth to outperform the industry averages for the second quarter and year-to-date periods,” said Thomas J. Corcoran, Jr., FelCor’s President and CEO. “RevPAR and EBITDA in markets such as Los Angeles, San Diego, Minneapolis, New Orleans and Washington, D.C. have recovered. However, the recovery in the San Francisco Bay area, Chicago, northern New Jersey and Philadelphia markets has just begun and offers significant upside potential for our EBITDA growth, as these four high-quality, primary markets represent more than 17 percent of our room inventory.”

          Earnings Before Interest, Taxes, Depreciation and Amortization (“EBITDA”), Adjusted EBITDA, Same-Store EBITDA, Funds From Operations (“FFO”), Adjusted FFO, Hotel Operating Profit and Hotel Operating Margin are all non-GAAP financial measures. See our discussion of “Non-GAAP Financial Measures” beginning on page 7 for a reconciliation of each of these measures to our net loss and for information regarding the use, limitations and importance of these non-GAAP financial measures.

Capital Structure:

          At June 30, 2005, we had $1.7 billion of debt outstanding with a weighted average life of five years, compared to $1.8 billion at December 31, 2004. Our cash and cash equivalents totaled approximately $125 million at the end of the quarter, compared to $119 million at year end.

          On April 8, 2005, we completed the issuance of 5.4 million depositary shares representing our 8% Series C preferred stock, with gross proceeds of $135 million. The gross proceeds were used to redeem a like number of depositary shares representing our 9% Series B preferred stock. In the second quarter, we recorded a reduction in net income applicable to common stockholders of $5 million for the original issuance cost of the Series B preferred shares redeemed. This transaction will reduce our preferred dividend obligations by approximately $1.4 million annually to $39 million. Following the redemption, we had approximately $34 million of our Series B preferred stock remaining outstanding.

Other Highlights:

          We expect our July total portfolio RevPAR to increase approximately eight percent, compared to the same period in 2004.

          During 2005, through July, we have sold five hotels for gross proceeds of $16 million. We also have one hotel under a firm sale contract for $38 million that is currently expected to close in the third quarter of 2005. During the second quarter, we completed the process of surrendering five of eight limited service hotels, owned by a consolidated joint venture with Interstate Hotels and Resorts, to their non-recourse mortgage holders. Two hotels were surrendered in July and the final hotel is expected to be transferred to the lender before the end of the third quarter. These eight hotels are generally located in depressed markets and are expected to generate negative cash flow for the foreseeable future. These hotels have an aggregate fair value less than the outstanding debt balance.

          After disposing of the previously mentioned hotels, we will have 13 hotels remaining that we are actively marketing for sale. Gross proceeds from the disposition of these hotels are expected to be approximately $107 million and we anticipate completing the sale of these hotels by mid-2006.

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FelCor Lodging Trust Second Quarter 2005 Operating Results
August 3, 2005
Page 3

          Our capital expenditures for the most recent quarter totaled $24 million.

          We declared and paid second quarter dividends on our Series A, Series B and Series C preferred stock.

2005 Guidance:

          As the result of our improving outlook, we have revised our guidance upward for the remainder of the year.

          We currently anticipate:

• Adjusted EBITDAto be between $268 and $270 million for the full year and between $71 and $72 million for the third quarter;

• RevPARfor the full year 2005 to increase 7.5 percent to 8.0 percent over 2004 RevPAR. For the third quarter, we expect RevPAR growth to be between 7.0 to 8.0 percent;

• Adjusted FFO per shareto be between $1.29 and $1.33 for 2005, and to be between $0.38 and $0.40 for the third quarter;

• Net loss applicable to common stockholdersto be between $57 million and $55 million, or $0.96 to $0.93 per share for the full year 2005, and $9 million and $8 million, or $0.15 to $0.13 for the third quarter; and

• Capital expendituresfor 2005, as previously stated, are expected to total approximately $100 million.

          “We are taking advantage of the robust demand growth and low supply growth. As we move through this lodging cycle with a higher quality portfolio, we expect strong RevPAR growth and further improvement in our operating margins,” said Richard A. Smith, FelCor’s Executive Vice President and Chief Financial Officer. “As a result of the better than expected lodging trends, we are pleased to raise guidance again for the remainder of 2005.”

          We have published our Second Quarter 2005 Supplemental Information, which provides additional corporate data, financial highlights and portfolio statistical data for the quarter and six months ended June 30, 2005. Investors are encouraged to access the Supplemental Information on our Web site atwww.felcor.com, on the Investor Relations page in the “Financial Reports” section. The Supplemental Information also will be furnished upon request. Requests may be made by e-mail toinformation@felcor.com or by writing to the Vice President of Investor Relations, FelCor Lodging Trust Incorporated, 545 E. John Carpenter Freeway, Suite 1300, Irving, Texas, 75062.

          FelCor is one of the nation’s largest hotel REITs and the nation’s largest owner of full service, all-suite hotels. FelCor’s portfolio is comprised of 130 consolidated hotels, located in 30 states and Canada. FelCor owns 68 upscale, all-suite hotels, and is the largest owner of Embassy Suites Hotels^® and Doubletree Guest Suites^®hotels. FelCor’s portfolio also includes 60 hotels in the upscale and full service segments. FelCor has a current market capitalization of approximately $3.2 billion. Additional information can be found on the Company’s Web site atwww.felcor.com.

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FelCor Lodging Trust Second Quarter 2005 Operating Results
August 3, 2005
Page 4

          We invite you to listen to our Second Quarter 2005 Conference Call on Thursday, August 4, 2005, at 9:00 a.m. (Central Daylight Time). The conference call will be webcast simultaneously via FelCor’s Web site atwww.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 “FelCor News” pages. A phone replay will be available from Thursday, August 4, 2005, at 12:00 noon (Central Daylight Time), through Friday, September 2, 2005, at 7:00 p.m. (Central Daylight Time), by dialing 877-244-9051 (access code is 5735). A recording of the call also will be archived and available atwww.felcor.com.

          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. 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 currently anticipated. General economic conditions, including the anticipated continuation of the current economic recovery, the impact of U.S. military involvement in the Middle East and elsewhere, future acts of terrorism, the impact on the travel industry of increased fuel prices and security precautions, the impact that the bankruptcy of one or more major air carriers may have on our revenues and receivables, the availability of capital, the ability to effect sales of non-strategic hotels at anticipated prices, 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.

Contact:
Thomas J. Corcoran, Jr., President and CEO	(972) 444-4901	tcorcoran@felcor.com
Richard A. Smith, Executive Vice President and CFO	(972) 444-4932	rsmith@felcor.com
Stephen A. Schafer, Vice President of Investor Relations	(972) 444-4912	sschafer@felcor.com
Monica L. Hildebrand, Vice President of Communications	(972) 444-4917	mhildebrand@felcor.com

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FelCor Lodging Trust Second Quarter 2005 Operating Results
August 3, 2005
Page 5

Consolidated Statements of Operations
(in thousands, except per share data)

	Three Months Ended						Six Months Ended
	June 30,						June 30,
	2005			2004			2005			2004
Revenues:
Hotel operating revenue:
Room	$	262,294		$	241,784		$	500,837		$	466,622
Food and beverage		47,154			45,021			88,810			85,194
Other operating departments		16,105			15,640			30,834			30,624
Retail space rental and other revenue		120			180			276			425
Total revenues		325,673			302,625			620,757			582,865
Expenses:
Hotel departmental expenses:
Room		67,105			63,661			128,721			123,352
Food and beverage		35,856			35,275			68,748			67,676
Other operating departments		8,142			7,869			15,367			15,231
Other property related costs		89,903			84,240			177,841			167,230
Management and franchise fees		16,887			15,863			31,687			30,179
Taxes, insurance and lease expense		32,524			29,628			63,341			59,543
Corporate expenses		4,728			4,380			9,269			7,742
Depreciation		30,485			28,027			60,093			56,503
Asset disposition costs		—			—			650			—
Total operating expenses		285,630			268,943			555,717			527,456
Operating income		40,043			33,682			65,040			55,409
Interest expense, net		(33,471	)		(39,203	)		(66,170	)		(79,797	)
Charge-off of deferred financing costs		—			(3,944	)		—			(4,174	)
Impairment		(732	)		—			(732	)		—
Loss on early extinguishment of debt		—			(28,246	)		—			(28,246	)
Gain on swap termination		—			1,005			—			1,005
Income (loss) before equity in income from unconsolidated entities, minority interests and gain on sale of assets		5,840			(36,706	)		(1,862	)		(55,803	)
Equity in income from unconsolidated entities		3,837			2,691			4,968			3,673
Minority interests		111			1,617			975			2,764
Gain on sale of assets		389			—			389			—
Income (loss) from continuing operations		10,177			(32,398	)		4,470			(49,366	)
Discontinued operations		174			725			(2,133	)		(3,006	)
Net income (loss)		10,351			(31,673	)		2,337			(52,372	)
Preferred dividends		(9,809	)		(8,970	)		(19,900	)		(15,696	)
Issuance costs of redeemed preferred stock		(5,198	)		—			(5,198	)		—
Net loss applicable to common stockholders	$	(4,656	)	$	(40,643	)	$	(22,761	)	$	(68,068	)
Basic and diluted per common share data:
Net loss from continuing operations	$	(0.08	)	$	(0.70	)	$	(0.35	)	$	(1.10	)
Net loss	$	(0.08	)	$	(0.69	)	$	(0.38	)	$	(1.15	)
Weighted average common shares outstanding		59,404			58,950			59,363			58,952

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FelCor Lodging Trust Second Quarter 2005 Operating Results
August 3, 2005
Page 6

Discontinued Operations
(in thousands)

          Included in discontinued operations are the results of operations of the 18 hotels disposed of in 2004, two hotels designated as held for sale at June 30, 2005, and nine hotels disposed of in the first two quarters of 2005. Condensed financial information for the hotels included in discontinued operations is as follows:

	Three Months Ended						Six Months Ended
	June 30,						June 30,
	2005			2004			2005			2004
Operating revenue	$	6,166		$	32,811		$	14,240		$	68,186
Operating expenses		5,710			31,114			15,118			70,154
Operating income (loss)		456			1,697			(878	)		(1,968	)
Direct interest costs, net		(40	)		(534	)		(581	)		(1,060	)
Impairment loss		—			—			(559	)		—
Loss on sale of assets		(234	)		(1,214	)		(214	)		(941	)
Minority interests		(8	)		776			99			963
Income (loss) from discontinued operations		174			725			(2,133	)		(3,006	)
Depreciation		300			2,144			1,189			4,562
Minority interest in FelCor LP		8			37			(99	)		(154	)
Interest expense		40			536			583			1,064
EBITDA from discontinued operations		522			3,442			(460	)		2,466
Loss on sale of assets		234			1,214			214			941
Impairment loss		—			—			559			—
Asset disposition costs		—			—			650			4,900
Adjusted EBITDA from discontinued operations	$	756		$	4,656		$	963		$	8,307

Selected Balance Sheet Data
(in thousands)

	June 30,			December 31,
	2005			2004
Investment in hotels	$	3,887,365		$	3,904,397
Accumulated depreciation		(994,414	)		(948,631	)
Investments in hotels, net of accumulated depreciation	$	2,892,951		$	2,955,766
Total cash and cash equivalents	$	124,945		$	119,310
Total assets	$	3,294,836		$	3,317,658
Total debt	$	1,743,420		$	1,767,122
Total stockholders’ equity	$	1,309,272		$	1,330,323

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FelCor Lodging Trust Second Quarter 2005 Operating Results
August 3, 2005
Page 7

Non-GAAP Financial Measures

          We refer in this press release to certain “non-GAAP financial measures.” These measures, including FFO, Adjusted FFO, EBITDA, Adjusted EBITDA, Same-Store EBITDA, hotel operating profit and hotel operating margin, are measures of our financial performance that are not calculated and presented in accordance with generally accepted accounting principles (“GAAP”). The following tables set forth the adjustments made and reconcile each of these non-GAAP measures to the most comparable GAAP financial measure. Immediately following the reconciliations, we include a discussion of why we believe these measures are useful supplemental measures of our performance and of the limitations upon such measures.

Reconciliation of Net Loss to FFO and Adjusted FFO
(in thousands, except per share and unit data)

	Three Months Ended June 30,
	2005								2004
						Per Share								Per Share
	Dollars			Shares		Amount			Dollars			Shares		Amount
Net income (loss)	$	10,351							$	(31,673	)
Preferred dividends		(9,809	)							(8,970	)
Issuance costs of redeemed preferred stock		(5,198	)							—
Net loss applicable to common stockholders		(4,656	)		59,404	$	(0.08	)		(40,643	)		58,950	$	(0.69	)
Depreciation from continuing operations		30,485					0.51			28,027					0.47
Depreciation from unconsolidated entities and discontinued operations		2,604					0.04			3,991					0.07
Loss (gain) on sale of assets		(155	)				(0.00	)		1,214					0.02
Minority interest in FelCor LP		(216	)		2,788		(0.02	)		(2,078	)		3,033		(0.02	)
Conversion of options and unvested restricted stock		—			339		—			—					—
FFO		28,062			62,531	$	0.45			(9,489	)		61,983		(0.15	)
Charge-off of deferred debt costs		—					—			3,944					0.06
Early extinguishment of debt		—								28,246					0.46
Impairment		732					0.01			—					—
Issuance costs of redeemed preferred stock		5,198					0.08			—					—
Asset disposition costs		—					—			—					—
Gain on swap termination		—					—			(1,005	)				(0.02	)
Adjusted FFO	$	33,992			62,531	$	0.54		$	21,696			61,983	$	0.35

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FelCor Lodging Trust Second Quarter 2005 Operating Results
August 3, 2005
Page 8

Reconciliation of Net Loss to FFO and Adjusted FFO
(in thousands, except per share and unit data)

	Six Months Ended June 30,
	2005								2004
						Per Share								Per Share
	Dollars			Shares		Amount			Dollars			Shares		Amount
Net income (loss)	$	2,337							$	(52,372	)
Preferred dividends		(19,900	)							(15,696	)
Issuance costs of redeemed preferred stock		(5,198	)							—
Net loss applicable to common stockholders		(22,761	)		59,363	$	(0.38	)		(68,068	)		58,952	$	(1.15	)
Depreciation from continuing operations		60,093					1.01			56,503					0.96
Depreciation from unconsolidated entities and discontinued operations		5,758					0.10			8,182					0.14
Loss (gain) on sale of assets		(175	)				0.00			941					0.02
Minority interest in FelCor LP		(1,059	)		2,788		(0.06	)		(3,485	)		3,033		(0.07	)
Conversion of options and unvested restricted stock		—			319					—
FFO		41,856			62,470		0.67			(5,927	)		61,985		(0.10	)
Charge-off of deferred debt costs		—								4,174					0.07
Early extinguishment of debt		—								28,246					0.46
Issuance costs of redeemed preferred stock		5,198					0.08			—					—
Asset disposition costs		1,300					0.02			4,900					0.08
Gain on swap termination		—					—			(1,005	)				(0.02	)
Impairment		1,291					0.02			—					—
Adjusted FFO	$	49,645			62,470	$	0.79		$	30,388			61,985	$	0.49

Reconciliation of Net Loss to EBITDA, Adjusted EBITDA and Same-Store EBITDA
(in thousands)

	Three Months Ended						Six Months Ended
	June 30,						June 30,
	2005			2004			2005			2004
Net income (loss)	$	10,351		$	(31,673	)	$	2,337		$	(52,372	)
Depreciation from continuing operations		30,485			28,027			60,093			56,503
Depreciation from unconsolidated entities and discontinued operations		2,604			3,991			5,758			8,182
Minority interest in FelCor Lodging LP		(216	)		(2,078	)		(1,059	)		(3,485	)
Interest expense		34,273			39,798			67,614			81,114
Interest expense from unconsolidated entities and discontinued operations		1,687			1,943			4,007			3,791
Amortization expense		755			519			1,352			1,022
EBITDA		79,939			40,527			140,102			94,755
Charge off of deferred debt costs		—			3,944			—			4,174
Early extinguishment of debt		—			28,246			—			28,246
Asset disposition costs		—			—			1,300			4,900
Loss (gain) on sale of assets		(155	)		1,214			(175	)		941
Gain on swap termination		—			(1,005	)		—			(1,005	)
Impairment		732			—			1,291			—
Adjusted EBITDA		80,516			72,926			142,518			132,011
Adjusted EBITDA from discontinued operations		(756	)		(4,656	)		(963	)		(8,307	)
Same-Store EBITDA	$	79,760		$	68,270		$	141,555		$	123,704

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FelCor Lodging Trust Second Quarter 2005 Operating Results
August 3, 2005
Page 9

Reconciliation of Estimated Net Loss to Estimated FFO and EBITDA
(in millions, except per share and unit data)

	Third Quarter 2005 Guidance												Full Year 2005 Guidance
	Low Guidance						High Guidance						Low Guidance						High Guidance
				Per Share						Per Share						Per Share						Per Share
	Dollars			Amount(a)			Dollars			Amount(a)			Dollars			Amount(a)			Dollars			Amount(a)
Net income (loss)	$	1					$	2					$	(13	)				$	(11	)
Preferred dividends		(10	)					(10	)					(39	)					(39	)
Issuance costs of redeemed preferred stock		—						—						(5	)					(5	)
Net loss applicable to common stockholders		(9	)	$	(0.15	)		(8	)	$	(0.13	)		(57	)	$	(.96	)		(55	)	$	(.93	)
Depreciation		33						33						133						133
Minority interest in FelCor LP		—						—						(2	)					(2	)
Issuance costs of redeemed preferred stock		—						—						5						5
FFO		24			0.38			25			0.40			79			1.26			81			1.29
Asset disposition costs		—						—						1						1
Impairment		—						—						1						1
Adjusted FFO	$	24		$	0.38		$	25		$	0.40		$	81		$	1.29		$	83		$	1.33
Net income (loss)		1						2						(13	)				$	(11	)
Depreciation		33						33						133						133
Minority interest in FelCor LP		—						—						(2	)					(2	)
Interest expense		34						34						137						137
Interest expense from unconsolidated entities		2						2						8						8
Amortization expense		1						1						3						3
EBITDA		71						72						266						268
Asset disposition costs		—						—						1						1
Impairment		—						—						1						1
Adjusted EBITDA	$	71					$	72					$	268					$	270

(a) Weighted average shares are 59.4 million. Adding minority interest and unvested restricted stock of 3.3 million shares to weighted average shares, provides the weighted average shares and units of 62.7 million used to compute FFO per share.

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FelCor Lodging Trust Second Quarter 2005 Operating Results
August 3, 2005
Page 10

Hotel Operating Profit and Hotel Operating Margin
(dollars in thousands)

	Three Months Ended						Six Months Ended
	June 30,						June 30,
	2005			2004			2005			2004
Total revenue	$	325,673		$	302,625		$	620,757		$	582,865
Retail space rental and other revenue		(120	)		(180	)		(276	)		(425	)
Hotel revenue		325,553			302,445			620,481			582,440
Hotel operating expenses		(250,417	)		(236,536	)		(485,705	)		(463,211	)
Hotel operating profit	$	75,136		$	65,909		$	134,776		$	119,229
Hotel operating margin		23.1	%		21.8	%		21.7	%		20.5	%

Hotel Operating Expense Composition
(dollars in thousands)

	Three Months Ended						Six Months Ended
	June 30,						June 30,
	2005			2004			2005			2004
Hotel departmental expenses:
Room	$	67,105		$	63,661		$	128,721		$	123,352
Food and beverage		35,856			35,275			68,748			67,676
Other operating departments		8,142			7,869			15,367			15,231
Other property related costs:
Administrative and general		29,406			27,874			57,893			54,982
Marketing and advertising		27,553			25,946			53,859			50,874
Repairs and maintenance		17,518			16,314			34,495			32,666
Energy		15,426			14,106			31,594			28,708
Taxes, insurance and lease expense		32,524			29,628			63,341			59,543
Total other property related costs		122,427			113,868			241,182			226,773
Management and franchise fees		16,887			15,863			31,687			30,179
Hotel operating expenses	$	250,417		$	236,536		$	485,705		$	463,211
Reconciliation of total operating expense to hotel operating expense:
Total operating expenses	$	285,630		$	268,943		$	555,717		$	527,456
Corporate expenses		(4,728	)		(4,380	)		(9,269	)		(7,742	)
Depreciation		(30,485	)		(28,027	)		(60,093	)		(56,503	)
Asset disposition costs		—			—			(650	)		—
Hotel operating expenses	$	250,417		$	236,536		$	485,705		$	463,211
Supplemental information:
Compensation and benefits expense (included in hotel operating expenses)	$	100,618		$	97,084		$	196,571		$	189,629

          Substantially all of our non-current assets consist of real estate. Historical cost accounting for real estate assets implicitly assumes that the value of real estate assets diminishes predictably over time. Since real estate values instead have historically risen or fallen with market conditions, most industry investors consider supplemental measures of performance, which are not measures of operating performance under GAAP, to be helpful in evaluating a real estate company’s operations. These supplemental measures, including FFO, Adjusted FFO, EBITDA, Adjusted EBITDA, Same-Store EBITDA, hotel operating profit and hotel operating margin, are not measures of operating performance under GAAP. However, we consider these non-GAAP measures to be supplemental measures of a hotel REIT’s performance and should be considered along with, but not as an alternative to, net income as a measure of our operating performance.

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FelCor Lodging Trust Second Quarter 2005 Operating Results
August 3, 2005
Page 11

FFO and EBITDA

          The White Paper on Funds From Operations approved by the Board of Governors of the National Association of Real Estate Investment Trusts (“NAREIT”), defines FFO as net income or loss (computed in accordance with GAAP), excluding gains or losses from sales of property, plus depreciation and amortization, and after adjustments for unconsolidated partnerships and joint ventures. Adjustments for unconsolidated partnerships and joint ventures are calculated to reflect FFO on the same basis. We compute FFO in accordance with standards established by NAREIT. This may not be comparable to FFO reported by other REITs that do not define the term in accordance with the current NAREIT definition, or that interpret the current NAREIT definition differently than we do.

          EBITDA is a commonly used measure of performance in many industries. We define EBITDA as net income or loss (computed in accordance with GAAP) plus interest expenses, income taxes, depreciation and amortization, and after adjustments for unconsolidated partnerships and joint ventures. Adjustments for unconsolidated partnerships and joint ventures are calculated to reflect EBITDA on the same basis.

Adjustments to FFO and EBITDA

          We adjust FFO and EBITDA when evaluating our performance because management believes that the exclusion of certain additional recurring and non-recurring items described below provides useful supplemental information to investors regarding our ongoing operating performance and that the presentation of Adjusted FFO, Adjusted EBITDA and Same-Store EBITDA, when combined with GAAP net income, EBITDA and FFO, is beneficial to an investor’s better understanding of our operating performance.

• Gains and losses related to early extinguishment of debt and interest rate swaps —We exclude gains and losses related to early extinguishment of debt and interest rate swaps from FFO and EBITDA because we believe that it is not indicative of ongoing operating performance of our hotel assets. This also represents an acceleration of interest expense or a reduction of interest expense, and interest expense is excluded from EBITDA.

• Impairment losses —We exclude the effect of impairment losses and gains or losses on disposition of assets in computing Adjusted FFO and Adjusted EBITDA because we believe that including these is not consistent with reflecting the ongoing performance of our remaining assets. Additionally, we believe that impairment charges and gains or losses on disposition of assets represent accelerated depreciation, or excess depreciation, and depreciation is excluded from FFO by the NAREIT definition and from EBITDA.

• Cumulative effect of a change in accounting principle— Infrequently, the Financial Accounting Standards Board promulgates new accounting standards that require the consolidated statements of operations to reflect the cumulative effect of a change in accounting principle. We exclude these one-time adjustments in computing Adjusted FFO and Adjusted EBITDA because they do not reflect our actual performance for that period.

          In addition, to derive Adjusted EBITDA, we exclude gains or losses on the sale of assets because we believe that including them in EBITDA is not consistent with reflecting the ongoing performance of our remaining assets. Additionally, the gain or loss on sale of depreciable assets represents either accelerated depreciation or excess depreciation in previous periods, and depreciation is excluded from EBITDA.

          To derive Same-Store EBITDA, we make the same adjustments to EBITDA as for Adjusted EBITDA and, additionally, exclude EBITDA from discontinued operations and gains and losses on the disposition of non-hotel related assets.

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FelCor Lodging Trust Second Quarter 2005 Operating Results
August 3, 2005
Page 12

Hotel Operating Profit and Operating Margin

          Hotel operating profit and operating margin are commonly used measures of performance in the industry and give investors a more complete understanding of the operating results over which our individual hotels and operating managers have direct control. We believe that hotel operating profit and operating margin is useful to investors by providing greater transparency with respect to two significant measures used by us in our financial and operational decision-making. Additionally, these measures facilitate comparisons with other hotel REITs and hotel owners. We present hotel operating profit and hotel operating margin by eliminating corporate-level expenses, depreciation and expenses related to our capital structure. We eliminate corporate-level costs and expenses because we believe property-level results provide investors with supplemental information with respect to the ongoing operating performance of our hotels and the effectiveness of management in running our business on a property-level basis. We eliminate depreciation and amortization, even though they are property-level expenses, because we do not believe that these non-cash expenses, which are based on historical cost accounting for real estate assets and implicitly assume that the value of real estate assets diminish predictably over time, accurately reflect an adjustment in the value of our assets.

Use and Limitations of Non-GAAP Measures

          Our management and Board of Directors use FFO, Adjusted FFO, EBITDA and Adjusted EBITDA to evaluate the performance of our hotels and to facilitate comparisons between us and other lodging REITs, hotel owners who are not REITs and other capital intensive companies. Same-Store EBITDA is used to provide investors with supplemental information as to the ongoing operating performance of our hotels without regard to those hotels sold or held for sale at the date of presentation.

          The use of these non-GAAP financial measures has certain limitations. FFO, Adjusted FFO, EBITDA, Adjusted EBITDA, Same-Store EBITDA, hotel operating profit and hotel operating margin, as presented by us, may not be comparable to FFO, Adjusted FFO, EBITDA, Adjusted EBITDA, Same-Store EBITDA, hotel operating profit and hotel operating margin as calculated by other real estate companies. These measures do not reflect certain expenses that we incurred and will incur, such as depreciation, interest and capital expenditures. Management compensates for these limitations by separately considering the impact of these excluded items to the extent they are material to operating decisions or assessments of our operating performance. Our reconciliations to the GAAP financial measures, and our consolidated statements of operations and cash flows, include interest expense, capital expenditures, and other excluded items, all of which should be considered when evaluating our performance, as well as the usefulness of our non-GAAP financial measures.

          These non-GAAP financial measures are used in addition to and in conjunction with results presented in accordance with GAAP. They should not be considered as alternatives to operating profit, cash flow from operations, or any other operating performance measure prescribed by GAAP. Neither should FFO, FFO per share, Adjusted FFO, Adjusted FFO per share, EBITDA, Adjusted EBITDA or Same-Store EBITDA be considered as measures of our liquidity or indicative of funds available for our cash needs, including our ability to make cash distributions. FFO per share does not measure, and should not be used as a measure of, amounts that accrue directly to the benefit of stockholders. FFO, Adjusted FFO, EBITDA, Adjusted EBITDA, Same-Store EBITDA, hotel operating profit and hotel operating margin reflect additional ways of viewing our operations that we believe when viewed with our GAAP results and the reconciliations to the corresponding GAAP financial measures provide a more complete understanding of factors and trends affecting our business than could be obtained absent this disclosure. Management strongly encourages investors to review our financial information in its entirety and not to rely on any single financial measure.

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