FelCor Lodging Trust FCH posted third-quarter earnings that were roughly in line with our estimates, but we've upped our cost of debt assumption in light of the firm's punishing October notes issuance. This change in assumptions engenders a cut to our fair value estimate for this hotel real estate investment trust. Revenues per available room, or revPAR, declined by 17.8% in the quarter on a year-over-year basis, which is an improvement from the second quarter's decline of 20.6%. Like other hotel owners, resilient summer leisure demand and deteriorated pricing helped occupancy rates improve considerably from a dismal second quarter on a year-over-year basis. Occupancy rates in the third quarter dropped just 4.4 percentage points, as compared with the 7.7-percentage-point drop in the second quarter. However, average daily rates tanked by 12.5% in the third quarter, worse than the 11.6% decline posted three months prior. With business demand still on the mat, we expect double-digit revPAR declines to continue in the fourth quarter.

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