Strategic Hotels Reports Q4 Net Loss

Reduces Work Force at Hotels by 15% in Salaried and Hourly Positions, 27% Reduction at Corporate Of

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. February 28, 2009

CHICAGO, IL, February 26, 2009 - Strategic Hotels & Resorts (NYSE: BEE) today reported results for the fourth quarter and year ended December 31, 2008.

Fourth Quarter Recap:

o Comparable funds from operations (Comparable FFO) totaled $0.17 per diluted share compared with $0.43 per diluted share from the prior year.

o Quarterly Comparable EBITDA was $48.7 million compared with $68.6 million in the prior year.

o North American total revenue per available room (Total RevPAR) decreased 13.0 percent and revenue per available room (RevPAR) decreased 13.3 percent driven by a 7.7 percentage point decrease in occupancy and a 3.2 percent decrease in average daily rate (ADR). Non-rooms revenue declined by 12.3 percent.

o European Same Store Total RevPAR decreased 19.4 percent (10.7 percent in constant dollars) and RevPAR decreased 22.3 percent (8.9 percent in constant dollars).

o North American gross operating profit (GOP) and EBITDA margins contracted 440 basis points. North American EBITDA per room declined 27.2 percent.

o Residential activity contributed $1.1 million in EBITDA, or $0.02 FFO per diluted share, during the quarter compared with $2.3 million in EBITDA, or $0.02 FFO per diluted share, in the prior period.

Full Year 2008 Recap:

o Comparable FFO was $1.27 per diluted share compared with $1.64 per diluted share from the prior year.

o Comparable EBITDA was $234.2 million compared with $273.7 million in the prior year.

o North American Total RevPAR and RevPAR decreased 3.5 percent driven by a 4.2 percentage point decrease in occupancy and a 2.1 percent increase in ADR. Non-rooms revenue declined by 3.1 percent.

o European Same Store Total RevPAR decreased 1.2 percent (6.4 percent in constant dollars) and RevPAR decreased 0.7 percent (5.0 percent in constant dollars).

o North American GOP and EBITDA margins contracted 160 basis points. North American EBITDA per room declined 9.0 percent.

o Residential activity contributed $1.9 million in EBITDA, or $0.02 FFO per diluted share, during 2008 compared with $14.4 million, or $0.10 FFO per diluted share, in the prior year.

Chief Executive Officer Laurence Geller remarked, "As we feel the full force of the current recession on our operating results, our management team continues to be focused on executing strategies to contain operating costs both at the hotels and the corporate office, cutting or eliminating discretionary capital programs and seeking revenue strategies to outperform the luxury set that has been most affected. Through the end of the year, we reduced the work force at our hotels by 15% in salaried and hourly positions, 27% at our corporate office, have virtually eliminated all capital programs over necessary FF&E spending and our top line is consistently outperforming the Smith Travel Research luxury results. In addition, we were able to amend our corporate line of credit to provide substantial contingency for the uncertainties that continue to lie ahead."

Financial Results

The company reported fourth quarter 2008 financial results as follows:

o Net loss available to common shareholders was $284.1 million, or $3.78 per diluted share, for the fourth quarter of 2008, compared with net income available to common shareholders of $5.4 million, or $0.07 per diluted share, for the fourth quarter of 2007.

o Adjusted EBITDA was a loss of $221.0 million compared with income of $69.4 million for the fourth quarter of 2007. Comparable EBITDA was $48.7 million compared with $68.6 million in the fourth quarter of 2007. Residential sales contributed $1.1 million to fourth quarter results compared with $2.3 million in the prior period.

o FFO was a loss of $252.6 million, or $3.32 per diluted share, compared with income of $32.0 million or $0.42 per diluted share in the fourth quarter of 2007. Comparable FFO was $12.9 million, or $0.17 per diluted share, compared with $32.9 million, or $0.43 per diluted share, in the fourth quarter of 2007. Residential sales contributed $1.2 million, or $0.02 per diluted share, to fourth quarter results compared with $1.4 million, or $0.02 per diluted share, in the prior period.

The company reported full year 2008 financial results as follows:

o Net loss available to common shareholders was $344.3 million, or $4.58 per diluted share, compared with net income available to common shareholders of $39.1 million, or $0.52 per diluted share, in the prior year period.

o Adjusted EBITDA was a loss of $88.7 million compared with income of $295.5 million in 2007. Comparable EBITDA was $234.2 million compared with $273.7 million in the prior period. Residential sales for the year contributed $1.9 million compared with $14.4 million in the prior year.

o FFO was a loss of $262.8 million, or $3.45 per diluted share, compared with income of $59.6 million, or $0.78 per diluted share, in the prior year period. Comparable FFO for the year was $97.0 million, or $1.27 per diluted share, compared with $124.8 million, or $1.64 per diluted share, in the prior period. Residential sales for the year contributed $1.7 million, or $0.02 per diluted share, compared with $7.6 million, or $0.10 per diluted share, in 2007.

Impairment Losses and Other Charges

In accordance with SFAS No. 142, "Goodwill and Other Intangible Assets", the company performed testing for impairment of goodwill and indefinite-lived intangible assets. As a result of an assessment of the conditions that have contributed to the company's reduced market capitalization relative to the book value of equity, including generally weak economic conditions, macroeconomic factors impacting industry business conditions, recent and forecasted operating performance, and continued tightening of the credit markets, along with other factors, management determined that an impairment charge for the fourth quarter was required.

The fourth quarter 2008 results include impairment of goodwill and other charges totaling $265.1 million. For the full year 2008, results include impairment losses and other charges totaling $361.8 million, including impairment of goodwill and other intangible assets of $318.1 million, a $35.7 million charge related to the company's decision not to proceed with its contracted purchase of hotel development space at the Aqua building in Chicago and a write-off of $8.0 million in other project costs.

These one-time charges have been excluded from Comparable EBITDA, FFO and FFO per share metrics.

Bank Credit Facility Amendment

Yesterday, the company completed an amendment to its bank credit facility which amended certain terms and covenants in order to provide protection against the deteriorating operating environment. The amended terms include a reduction in total facility size to $400.0 million, an increase in pricing to LIBOR plus 375 basis points and security interests in five previously unsecured hotel properties. In return, the company negotiated a reduction of the minimum corporate fixed charge coverage ratio to 0.9 times and an increase in maximum corporate leverage to 80%. The maturity date of the facility remains unchanged with an initial maturity in March 2011 and a one year extension option available upon achieving certain specified performance criteria.

Chief Executive Officer Laurence Geller commented "Given that we cannot be certain as to the depth and length of the current economic environment, we had to consider the necessity of substantially increasing the liquidity contingency available to the company. As such, our amended credit facility was strengthened to give us that added contingency."

Quarterly Distribution

The Board of Directors previously declared on December 11, 2008 a quarterly dividend to shareholders of record on December 19, 2008 of $0.53125 per share of 8.50 percent Series A Cumulative Redeemable Preferred Stock, $0.51563 per share of 8.25 percent Series B Cumulative Redeemable Preferred Stock, and $0.51563 per share of 8.25 percent Series C Cumulative Redeemable Preferred Stock. The preferred stock dividends were paid on December 31, 2008.

The Board of Directors elected to suspend the quarterly dividend to holders of Series A, B and C Cumulative Redeemable Preferred Stock to preserve liquidity due to the declining economic environment for hotel operations and no projected taxable distribution requirement. Elimination of preferred dividends equates to approximately $7.7 million in cash flow savings per quarter.

The company had previously announced the Board of Directors elected to suspend dividends on common stock beginning in the fourth quarter of 2008, which is estimated to save approximately $90 million through the end of 2009.

2009 Guidance

The company is not providing guidance for 2009 at this time as the current market environment provides insufficient visibility into future operating performance. Certain items should however be considered in 2009 including:

o Interest expense of approximately $100.0 million including amortization of deferred financing costs and the inclusion of approximately $3.8 million related to the amortization of the loan discount on $180 million of exchangeable notes, and discontinued capitalization of interest on land held for development, which increases expensed interest by approximately $6.0 million;

o Corporate expenses of $23.0 million to $24.0 million including $4.7 million in non-cash expense related to equity based compensation awarded in prior years; and

o Accrual of unpaid preferred dividends will reduce income available to common shareholders and Comparable FFO by approximately $7.7 million per quarter.

Earnings Call

The company will conduct its fourth quarter 2008 conference call for investors and other interested parties on February 27, 2009 at 11:00 a.m. Eastern Time (ET). Interested individuals are invited to listen to the call by telephone at 888-713-4214 (toll international: 617-213-4866) with pass code 11119224. To participate on the web cast, log on to http://www.strategichotels.com or https://www.theconferencingservice.com/prereg/key.process?key=PGB4JXVEX 15 minutes before the call to download the necessary software. For those unable to listen to the call live, a taped rebroadcast will be available beginning at 2:00 p.m. ET on February 27, 2009, through 11:59 p.m. ET on March 6, 2009. To access the replay, dial 888-286-8010 (toll international: 617-801-6888) and request replay pin number 21287915. A replay of the call will also be available on the Internet at http://www.strategichotels.com or http://www.earnings.com for 30 days after the call.

The company also produces supplemental financial data that includes detailed information regarding its operating results. This supplemental data is considered an integral part of this earnings release. These materials are available on the Strategic Hotels & Resorts website at www.strategichotels.com within the fourth quarter information section.

Portfolio Definitions

North American hotel comparisons for the fourth quarter 2008 are derived from the company's hotel portfolio at December 31, 2008, consisting of properties in which operations are included in the consolidated results of the company.

European Same Store hotel comparisons for the fourth quarter 2008 are derived from the company's European owned and leased hotel properties at December 31, 2008, consisting of the Marriott London Grosvenor Square, the Paris Marriott Champs-Elysees, the Marriott Hamburg, the InterContinental Prague and the Renaissance Paris Hotel Le Parc Trocadero.

European Same Store hotel comparisons for the twelve month period are derived from the company's European owned and leased hotel properties at December 31, 2008, consisting of the Marriott London Grosvenor Square, the Paris Marriott Champs-Elysees, the Marriott Hamburg, and the InterContinental Prague but excluding the Renaissance Paris Hotel Le Parc Trocadero, which was acquired during the third quarter of 2007.