Rick Smith, President and Chief Executive Officer of FelCor Lodging Trust

This year is off to a very busy start as we are in the midst of our renovation program, which is unprecedented in terms of size and scale.

We sold three hotels to date for gross proceeds of $65 million and have only eight non-strategic hotels remaining for sale. As the repositioning program winds down, we are completely focused on the next phase of our strategic plan; the renovation and redevelopment programs.

As I mentioned in my previous letter, the focus for this company in 2007 will be on the following three things: execute the renovations with the quality we expect; continue to fight to mitigate displacement daily throughout the year; and to work from an operational perspective to achieve the returns we expect post renovation.

I would like to talk about how we are doing on those three goals. During the first quarter, we completed renovations at 17 properties and completed another three so far this month. We have remained on schedule, with the exception of a couple of hotels and plan to complete renovations at 64 hotels this year, or 77% of our portfolio.

There was a significant amount of displacement during the first quarter as a result of the renovations and RevPAR growth slowed significantly. The displacement impact was not unexpected; however, we are continuing to minimize the impact to the extent possible.

We expect high returns from the renovations, and the initial results are very positive. In 2006, we completed renovations at eight hotels. The 2007 budgets, on average, were expected to meet our targeted returns, and the first quarter actual results were in line with expectations.

The execution and success of this plan can only be accomplished with everyone's hard work and efforts. I want to extend my appreciation to everyone in the field and at the corporate office for all your efforts in making this renovation program a success.