Fairmont Reports 4Q 2005 Results

. October 14, 2008

TORONTO, Ontario, February 24, 2006. Fairmont Hotels & Resorts Inc. ("FHR" or the "Company") (TSX/NYSE: FHR) today announced its financial results for the three months and year ended December 31, 2005. These financial results have been prepared in accordance with Canadian generally accepted accounting principles. All amounts are expressed in U.S. dollars.

Fourth Quarter 2005 Highlights

Diluted income per share ("diluted EPS") for the fourth quarter was $0.88 compared to a diluted loss per share of $0.06 for the same period in 2004. Excluding the effect of hotels sold in 2004 and 2005, gains on asset sales, a tax recovery and other non-operating items, diluted EPS rose to $0.12 from a diluted loss per share of $0.05 in the fourth quarter of 2004.
Revenues increased 40.9% to $232.4 million. Excluding the effect on revenues of hotels sold in 2004 and 2005 and the proceeds from land sales, revenues were up 16.8%.
Revenue per available room(1) ("RevPAR") for the comparable(2) Fairmont managed portfolio improved 11.8% driven by RevPAR growth of 15.4% at the comparable U.S. and International managed portfolios.
EBITDA(3) for the fourth quarter was $116.2 million compared to $20.4 million for the same period in 2004. Fourth quarter EBITDA included a gain on asset sales of $122.9 million in 2005 and a loss of $0.5 million in 2004. As a result of the sale of The Fairmont Orchid, Hawaii on December 23, EBITDA and Adjusted EBITDA in the fourth quarter were $2.0 million lower than previously expected due to lost real estate earnings from the resort during the holiday season.
Adjusted EBITDA(3) for the fourth quarter of 2005 was $31.6 million compared to $34.2 million for the same period in 2004. Adjusted EBITDA increased 9.9% when excluding the impact of the hotels sold in 2004 and 2005 and The Fairmont Southampton, which was closed for hurricane repairs during the first quarter of 2004 and therefore was excluded from FHR's comparable portfolio.
FHR sold its real estate interest in The Fairmont Orchid for a gain of $105.8 million while maintaining a long-term management contract.
The Company entered into six agreements for hotel and/or residential developments, all opening between 2007 and 2009.
FHR completed the sale of two blocks of land in Toronto's Southtown for gross proceeds of $42.8 million.
The Company announced an Acquisition Agreement with Kingdom Hotels International and Colony Capital for all of FHR's outstanding common shares at a price of $45.00 per share in cash (see Announcements and Corporate Activities).

"Our U.S. properties continue to benefit from the robust U.S. lodging fundamentals. In the fourth quarter, our comparable U.S. managed and owned portfolios experienced RevPAR growth of 15.0% and 9.6%, respectively, primarily driven by strong occupancy gains across all markets," said William R. Fatt, FHR's Chief Executive Officer. "Our International portfolio also had significant gains, with RevPAR at the managed and owned portfolios up 17.0% and 11.3%, respectively."

"Looking ahead to 2006, we expect current industry trends to continue with ongoing strength in our U.S. and International properties. As our Canadian portfolio earns such a significant portion of its annual earnings in the third quarter, it is too early to provide details on performance," said Mr. Fatt. "Going forward, we remain focused on enhancing the performance of our portfolio, building on the success of our brand and expanding into new key city center and resort destinations. We are excited about the opportunity to combine the Fairmont and Raffles portfolios to create a global luxury hotel leader. These two brands are an excellent strategic fit with rich histories, global brand recognition and complementary destinations."

Three months ended Year ended

Revenues December 31 December 31

(In millions of U.S. dollars) 2005 2004 2005 2004

---|- --|-- -|---| ---|-

Reported Revenues $ 232.4 $ 164.9 $ 857.5 $ 768.7

Less:

Amounts attributable

to hotels sold 13.3 14.0 63.9 106.5

Proceeds from sale of

undeveloped land 42.8 - 60.7 15.4

---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|-

Revenues adjusted for

hotels sold and land

sales $ 176.3 $ 150.9 $ 732.9 $ 646.8

---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|-

Three months ended Year ended

Diluted income December 31 December 31

(loss) per share 2005 2004 2005 2004

---|- --|-- -|---| ---|-

Diluted income (loss)

per share $ 0.88 $ (0.06) $ 2.16 $ 1.92

Less:

Amounts attributable to

hotels sold (0.01) 0.00 (0.02) 0.10

Gains on asset sales 0.98 0.01 1.17 1.29

Other non-operating items(i) (0.24) - (0.40) -

Tax recovery - - 0.49 -

---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|-

Diluted income (loss) per

share adjusted for hotels

sold, gains on asset

sales, tax recovery

and other non-operating

items $ 0.12 $ (0.05) $ 0.87 $ 0.45

---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|-

(i) 2005 results include a number of non-operating items: transactions costs (Q2); a legal provision (Q3); restructuring and lease termination costs (Q4); one-time pension costs (Q4); advisory fees relating to a strategic review undertaken by the Board of Directors (Q4); and a provision related to an impairment of long-term advances receivable (Q4).

(ii) Totals may not add due to rounding and the exclusion of any anti-dilutive impact.

Fourth Quarter Ownership Operations

The Company's hotel ownership results are affected by the seasonal nature of the assets owned. The table below presents, by quarter, the comparable hotel ownership EBITDA contribution by region.

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Interna-

2005 Canada U.S. tional

---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|-

First quarter 21% 35% 44%

---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|-

Second quarter 50% 31% 19%

---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|-

Third quarter 88% 6% 6%

---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|-

Fourth quarter 14% 46% 40%

---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|-

Full-year 53% 24% 23%

---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|-

Comparable owned hotels revenues:

---|---|---|---|---|---|---|---|---|---|--

---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|-

Comparable revenues Canada U.S. International Total

---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|-

Increase from fourth

quarter 2004 4.6% 16.7% 14.5% 10.8%

---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|-

Canadian Owned Hotels: Revenues for the Canadian owned hotels were impacted by the 3.8% appreciation of the Canadian dollar against the U.S. dollar when compared to the fourth quarter of 2004. The balance of the increase was primarily driven by The Fairmont Chateau Lake Louise, which experienced revenue growth of 9.3% and a 10.2% improvement in RevPAR.
U.S. Owned Hotels: This portfolio's revenue improvements were largely driven by The Fairmont Scottsdale Princess, which enjoyed RevPAR growth of 14.3%.
International Owned Hotels: Increased revenues for the International owned portfolio was the result of double-digit RevPAR growth at all properties in this portfolio. In Mexico, The Fairmont Acapulco Princess and The Fairmont Pierre Marques experienced RevPAR increases of 11.2% and 11.7%, respectively.

Comparable owned hotels operating statistics:

---|---|---|---|---|---|---|---|---|---|---|---|---|---|--

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Increase (decrease)

from fourth

quarter 2004 Canada U.S. International Total

---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|-

RevPAR 6.7% 9.6% 11.3% 8.8%

---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|-

Average daily rate ("ADR") 5.8% (3.5%) 4.2% 3.8%

---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|-

Occupancy 0.5 8.5 3.7 2.8

points points points points

---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|-

Canadian Owned Hotels: The improvement in ADR is primarily a result of the appreciation of the Canadian dollar. Adjusting for the appreciation of the Canadian dollar, RevPAR for this portfolio was up 2.6%.
U.S. Owned Hotels: Solid occupancy growth continued to be the driver for the U.S. owned portfolio as a result of increased leisure and group demand.
International Owned Hotels: The International owned portfolio's performance was primarily impacted by a considerable increase in leisure demand in Acapulco compared to the same quarter last year.

Comparable owned hotels EBITDA(3):

---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|-

Comparable EBITDA Canada U.S. International Total

---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|-

Increase (decrease)

from fourth quarter 2004 (42.1%) 31.2% (0.2%) (2.1%)

---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|-

Canadian Owned Hotels: EBITDA for the Canadian owned hotels decreased $2.4 million to $3.3 million as a result of recent restructuring costs across the portfolio and fewer U.S. leisure travelers over the holiday period. Excluding the restructuring costs, EBITDA was down approximately $2 million or 35%.
U.S. Owned Hotels: EBITDA for this portfolio, which excludes The Fairmont Orchid, was up $2.0 million to $8.4 million in the fourth quarter. The Fairmont Scottsdale Princess reported significant EBITDA growth as a result of a 10.1 percentage point occupancy improvement.
International Owned Hotels: EBITDA was essentially flat for this portfolio as all of these properties incurred restructuring costs in the quarter. Excluding these costs, EBITDA increased about $1.9 million or 26%.

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Comparable EBITDA

margin Canada U.S. International Total

---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|-

Increase (decrease)

from fourth quarter 2004 (560bp) 270bp (320bp) (220bp)

---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|-

Canadian Owned Hotels: EBITDA margins for the Canadian owned hotels decreased relative to the fourth quarter of 2004 due to softness in American leisure business as well as restructuring costs incurred during the quarter. Both of these factors had a considerable impact given that the fourth quarter is not a significant earnings period for the Canadian portfolio. Excluding the restructuring costs, the EBITDA margin was down 480 basis points.
U.S. Owned Hotels: Solid revenue growth of 16.7% was the key driver of EBITDA margin improvement for this portfolio.
International Owned Hotels: Like the Canadian portfolio, the International owned assets experienced a decline in EBITDA margins as a result of restructuring costs during the fourth quarter of 2005.

Excluding these costs, margins increased by 240 basis points.

Real estate activities: Real estate activities in the fourth quarter produced revenues of $49.4 million and a $16.9 million contribution to EBITDA. This was generated primarily by two land sales in Toronto, which yielded net proceeds and after-tax gains of $17.1 million. Real estate activities for the same period in 2004, primarily from Fairmont Heritage Place, generated $4.8 million in revenues and a $1.6 million loss to EBITDA.

Fourth Quarter Management Operations

---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|-

Increase from fourth quarter 2004 Fairmont Delta

---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|-

Revenues under management 5.7% 7.5%

---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|-

Management fee revenues 42.4% 18.8%

---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|-

Comparable worldwide RevPAR 11.8% 13.3%

---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|-

Comparable worldwide ADR 6.8% 7.8%

---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|-

Comparable worldwide Occupancy 2.8 points 3.1 points

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Fairmont Management Operations

Revenues under management of $448 million increased 5.7% over 2004. The addition of The Savoy, A Fairmont Hotel, Fairmont Monte Carlo, Fairmont Newport Beach, five hotels in Kenya and improved operating results at the U.S. hotels, all contributed to this increase.
Management fee revenues were up 42.4% to $20.5 million, as a number of annual incentive thresholds were surpassed during the quarter.
EBITDA margin of 46.8% was down from 64.6% in the prior year primarily due to higher incentive compensation costs as a result of the Company's higher share price in the fourth quarter of 2005.
For the Fairmont comparable managed portfolio, RevPAR increased 11.8% to $118.70. The comparable International managed portfolio experienced solid RevPAR growth of 17.0%, driven by a 15.3% improvement in ADR. The comparable U.S. managed hotels also showed strong growth with RevPAR up 15.0%, resulting from a 4.2% increase in ADR combined with an occupancy gain of 6.2 percentage points. The comparable Canadian managed portfolio reported a 6.9% RevPAR improvement, driven primarily

by an increase in ADR of 5.2%. Adjusting for the appreciation of the Canadian dollar, RevPAR for the Canadian portfolio was up 2.8% for the quarter.

Delta Management Operations

Delta's revenues under management increased 7.5% to $108 million, primarily due to improved operating results and the appreciation of the Canadian dollar.
Management fee revenues for the fourth quarter were $3.8 million compared to $3.2 million for the same period in 2004. This 21.4% increase in management fee revenues relates primarily to a number of properties exceeding their annual incentive fee thresholds in the fourth quarter.
RevPAR increased 13.3% over the fourth quarter of 2004 resulting from a 7.8% increase in ADR and a 3.1 percentage point improvement in occupancy. Adjusting for the appreciation of the Canadian dollar, RevPAR was up approximately 8.9%.

General and Administrative Expenses

General and administrative expenses for the quarter were $14.7 million compared to $9.2 million for the same period in 2004. Increased incentive compensation costs as a result of the Company's higher share price and one-time pension plan costs were the primary drivers.

Year-end Consolidated Results

For the year ended December 31, 2005, EBITDA was $264.8 million compared to $324.7 million for the same period in 2004. EBITDA for both periods includes gains on asset sales of $140.8 million and $152.6 million, respectively. Adjusted EBITDA was $203.1 million compared to $216.0 million for the same period in 2004. Excluding the three hotels sold and The Fairmont Southampton, which was closed for hurricane repairs during the first quarter of 2004, Adjusted EBITDA increased 4.6% to $185.4 million.

Net income for the year was $167.5 million (diluted EPS of $2.16), compared to the prior year's net income of $155.8 million (diluted EPS of $1.92). Excluding the impact of hotels sold, gains on asset sales, other non- operating items and the tax recovery, diluted EPS increased 93% to $0.87 from $0.45.

Announcements and Corporate Activities

On December 9, 2005, Icahn Partners LP and Icahn Partners Master Fund LP commenced a formal unsolicited partial takeover bid for approximately 41% of the outstanding common shares of the Company at a price of $40.00 per share. On December 22, 2005, Fairmont's Board of Directors issued its Circular recommending that the Icahn offer be rejected, as it was not in the best interest of its shareholders. At the same time, the Board of Directors disclosed that it was actively exploring strategic alternatives to maximize value for shareholders, which might include a possible transaction with one or more third parties.

On January 30, 2006, Fairmont announced that it had entered into an Acquisition Agreement with a Canadian company owned by Kingdom Hotels International and Colony Capital, which is expected to acquire all of Fairmont's outstanding common shares at a price of $45.00 per share in cash. The total value of this transaction, including debt is $3.9 billion. The transaction was unanimously approved by Fairmont's Board of Directors following receipt of the recommendation of a Special Committee of the Board. Fairmont's Board has agreed to recommend to its shareholders that they vote in favor of the transaction.

The closing of the transaction, which is expected to occur in May, is not subject to any financing condition. The closing is subject to certain other customary conditions, including regulatory approvals. The proposed transaction is expected to close in the second quarter of 2006, shortly after receipt of shareholder and court approvals. The transaction is to be carried out by way of a statutory plan of arrangement and, accordingly, will be subject to the approval of 66 2/3% of the votes cast by Fairmont's shareholders at a meeting of shareholders scheduled for April 18, 2006 as well as court approval.

Fairmont has been advised by Kingdom and Colony of their intention to combine the Fairmont and Raffles portfolios following the completion of the transaction, transforming the companies into a global luxury hotel leader with 120 hotels in 24 countries. Fairmont will continue as a hotel management company headquartered in Canada and Raffles, based in Singapore, will also retain its separate brand identity. Raffles owns and manages a portfolio of 33 properties located primarily across Asia and Europe, including its flagship property built in 1887, the Raffles Hotel, Singapore.

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