�There has been a sharp decline in lodging demand as companies have reduced travel and technology related business activity has slowed,� said Thomas J. Corcoran, Jr., FelCor�s President and CEO.  �The slowdown in demand was expected, but the speed and extent of the decline was greater than anticipated.�

The Company estimates a decline in RevPAR for the second quarter of about 7.0 percent, compared to the same period for 2000.  Occupancy decreased by about 6.0 percentage points to 69 percent, while the average daily rate was $104, which was relatively flat with the same period for 2000.

�We expect a challenging operating environment for the remainder of the year, and negative RevPAR in the range of 2 percent to 4 percent for full year 2001.  We continue to work with our managers to generate additional revenues, as well as to reduce costs to preserve operating margins.  Supply growth has decelerated, and should result in demand exceeding supply for 2002,� added Corcoran.

The Company�s common dividend yield based on the closing price on Friday, July 6 was 9.4 percent.  The common dividend payout ratio based on the estimated FFO per share is expected to be 57 percent to 59 percent for the second quarter of 2001.

On May 10, 2001, FelCor announced the $2.7 billion acquisition of MeriStar Hospitality Corporation.  FelCor currently expects to close the transaction in the third quarter, subject to its approval by FelCor and MeriStar shareholders.  The Company has filed a registration statement with the Securities and Exchange Commission containing the Joint Proxy Statement/Prospectus to be mailed to shareholders with respect to the merger and is on track for completion of the financings related to the merger.

FelCor will release second quarter 2001 financial results after the close of the market on Wednesday, August 8, 2001.

FelCor�s hotel portfolio consists of 186 hotels with approximately 50,000 rooms and suites and is concentrated primarily in the upscale and full-service segments.  FelCor is the owner of the largest number of Embassy Suites®, Crowne Plaza®, Holiday Inn® and independently owned Doubletree®-branded hotels.  Other leading hotel brands under which FelCor�s hotels are operated include Sheraton Suites®, Sheraton® and Westin®.  FelCor has a current market capitalization of approximately $3.5 billion.  Additional information can be found on the Company�s website at www.felcor.com <http://www.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 that are qualified by cautionary statements contained herein and in FelCor�s filings with the Securities and Exchange Commission.