The financial markets continue to rally but real estate stocks remain flat.

Earlier this year, the markets were tanking. And real estate stocks again stayed flat as a pancake. So what's a company to do?

Real estate investment trusts (REITs) and other real estate equities continue their struggle to attract new investors in an economy that is blatantly shunning even the highest-performing real estate firms. Recently, this column told you about CB Richard Ellis, one of the world's largest providers of real estate services. With a market cap of only $310 million -- and annual revenues topping $1.3 billion -- CB Richard Ellis is taking the drastic step of going private.

This week, we saw a different kind of stunt that shows just how far real estate firms must go to get attention. FelCor Lodging Trust Inc. (NYSE: FCH) is the nation's second-largest hotel REIT, part of the hotel sector which remains one of the strongest performers in real estate.

With a market cap of $3.4 billion and annual revenues of $557 million, FelCor is by no means as undervalued as CB Richard Ellis. But considering the firm's strong and consistent financial performance, its trading volume of only 125,500 shares per day reveals a basic lack of respect for its shares by Wall Street.

FelCor this week took matters into its own hands by launching a marketing effort for, of all things, its annual report. The firm has transformed what used to be a rather plain-Jane, standard report into a jazzy, Web-enabled tour of the company and its hotels.

The annual report is a cross between a 1950s summer camp brochure and a T.G.I. Friday's menu, complete with a caricature FelCor President and CEO Tom Corcoran.

Dubbed Follow Us To FelCor!, the report includes snazzy graphics, as well as profiles of seven FelCor-owned hotels that have successfully undergone renovation and conversion to more upscale brands.

If that's not enough, FelCor shareholders also can benefit from discount rates at the company's hotels. While companies in many industries have let their shareholder benefit programs long since fall by the wayside, FelCor still offers $89 rooms nights at its Sheraton, Westin, Embassy Suites and DoubleTree hotels, as well as 20 percent off corporate rates at its Holiday Inn and Crowne Plaza properties.

Of course, this strategy serves the company well by not only building loyalty among shareholders but also filling otherwise empty rooms during slow times.

FelCor's portfolio, which is primarily concentrated in the upscale and full-service segments, has grown to 186 hotels with nearly 50,000 rooms and suites. The company's hotels are located in 35 states and Canada, with more than 50 percent in California, Texas and Florida.

Analysts remain high on FelCor, with two recommending the stock as a strong buy, seven as a moderate buy and four as a hold. These analysts expect the company's revenue to drop slightly this year, but also predict earnings will rise from $4.29 in 2000 to $4.44.

The company predicts growth in revenue per available room (RevPAR), the standard measure of financial performance for hotels, of a modest 3 percent to 4 percent this year. This comes after strong 7 percent growth in 2000. Why not 7 percent in 2001? According to the annual report, a weakened economy, of course.

FelCor shares got a slight bump this week after a rocky April. The company's stock is trading at between $21 and $22, down only slightly from the 52-week high of almost $25.

For more articles by Lesley Hensell, please press here.

Published: April 20, 2001

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Lesley Hensell covers commercial real estate and financial issues for Realty Times. Based outside of Dallas, Lesley works with high-tech and real estate clients as an independent marketing and public relations consultant. She also writes for several publications, including the Dallas Morning News. E-mail Lesley at: lhensell@earthlink.net