Strategic Reports 2nd Qtr Net Loss

North American RevPAR Decreased 28.7%

. August 08, 2009

CHICAGO, IL, August 5, 2009 - Strategic Hotels & Resorts (NYSE: BEE) today reported results for the second quarter ended June 30, 2009.

Second Quarter Recap

Comparable funds from operations (Comparable FFO) was a loss of $0.03 per diluted share compared with income of $0.48 per diluted share in the prior year.
Quarterly Comparable EBITDA was $33.6 million compared with $74.1 million in the prior year.
North American total revenue per available room (Total RevPAR) decreased 28.7 percent and revenue per available room (RevPAR) decreased 30.6 percent driven by a 9.6 percentage point decrease in occupancy and a 20.7 percent decrease in average daily rate (ADR). Non-rooms revenue declined by 26.4 percent.
The company's two Mexican properties were adversely impacted by events surrounding the H1N1 virus outbreak. Excluding these hotels, North American Total RevPAR would have decreased 25.5 percent and RevPAR would have decreased 27.3 percent.
European Total RevPAR decreased 28.0 percent (14.0 percent in constant dollars) and RevPAR decreased 25.2 percent (10.8 percent in constant dollars).
North American gross operating profit (GOP) and EBITDA margins contracted 810 basis points and 950 basis points, respectively. Excluding the company's Mexican assets, North American GOP and EBITDA margins would have contracted 690 basis points and 820 basis points, respectively.

Chief Executive Officer Laurence Geller remarked, "We have recently seen some improvement in certain leading indicators and an overall increase in confidence pertaining to future economic conditions. Nevertheless, our financial results continue to be heavily influenced by the lingering recession and general weakness in the hotel industry, which is particularly acute in higher-end assets. While we saw declines in every segment of our business, the falloff in group activity was especially costly as we were forced to replace lost group occupancy with discounted transient business, leading to a significant decline in average rates and sharp contraction in profit margins.

During this challenging period we remained vigilant in controlling costs and, despite the drop in rates, are pleased to have achieved our stated objective of limiting our portfolio's year-over-year percentage decline in EBITDA relative to its percentage decline in revenue to under a two-to-one ratio. We also continue to make progress on lowering corporate overhead costs as we reported corporate expenses of $5.5 million for the quarter, a 28 percent reduction from a year ago."

Financial Results

The company reported second quarter 2009 financial results as follows:

Net loss attributable to common shareholders was $86.0 million, or $1.14 per diluted share, compared with net income attributable to common shareholders of $10.6 million, or $0.14 per diluted share, for the second quarter of 2008.
Comparable EBITDA was $33.6 million compared with $74.1 million for the second quarter of 2008.
FFO was a loss of $52.8 million, or $0.70 per diluted share, compared with income of $40.6 million, or $0.53 per diluted share, in the second quarter of 2008. Comparable FFO was a loss of $2.5 million, or $0.03 per diluted share, compared with income of $36.4 million, or $0.48 per diluted share, in the second quarter of 2008.

The company reported financial results for the six month period ending June 30, 2009 as follows:

Net loss attributable to common shareholders was $129.2 million, or $1.72 per diluted share, compared with net income attributable to common shareholders of $2.6 million, or $0.04 per diluted share, for the six month period ending June 30, 2008.
Comparable EBITDA was $56.3 million compared with $129.8 million for the six month period ending June 30, 2008.
FFO was a loss of $63.4 million, or $0.84 per diluted share, compared with income of $59.9 million, or $0.79 per diluted share, in the six months ending June 30, 2008. Comparable FFO was a loss of $13.9 million, or $0.18 per diluted share, compared with income of $58.9 million, or $0.77 per diluted share, in the six month period ending June 30, 2008.

Impairment Losses and Other Charges

Second quarter 2009 results include impairment of goodwill and other charges totaling $49.8 million, including impairment of goodwill of $41.9 million and write-offs of $7.9 million related to the abandonment of certain capital projects.

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

Liquidity

As of the end of the second quarter, the company had $398.4 million available on its $400.0 million bank credit facility against $261.3 million total outstanding, leaving $137.1 million of liquidity. Certain financial covenants limit availability on the facility, including cash flow generated by five borrowing base assets, calculated on a trailing twelve month basis. These hotels include the Four Seasons in Mexico City and Punta Mita, both of which have been impacted by the H1N1 virus outbreak during the second quarter, security concerns associated with traveling to Mexico and general economic weakness. As a result, availability on the facility is projected to be further restricted in future quarters, thus putting increased pressure on the company's liquidity position.

Mr. Geller commented, "The spread, and perceived threat, of the H1N1 virus had a serious negative impact on our two Mexican assets. RevPAR at these hotels declined 57.7% during the second quarter and EBITDA decreased $7.2 million from the prior period. We are cognizant of the restrictions this puts on the availability on our bank credit facility and constantly monitor our liquidity position."

Subsequent Event

The company entered into a joint venture agreement on its existing 60-acre ocean front land parcel near the Four Seasons Punta Mita Resort in Nayarit, Mexico with Cantiles de Mita, S.A. de C.V., a wholly owned subsidiary of DINE, the master developer of Punta Mita and original seller of the land parcel. In exchange for a 50 percent interest in the land, the company is released from its final installment payment of $17.5 million due in August 2009 and receives a preferred position which entitles the company to receive the first $12.0 million of distributions generated from the project with any excess distributions split equally among the partners.

Earnings Call

The company will conduct its second quarter 2009 conference call for investors and other interested parties on August 6, 2009 at 10:00 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 19665792. To participate on the web cast, log on to http://www.strategichotels.com orhttps://www.theconferencingservice.com/prereg/key.process?key=PEXWEGEC3 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 1:00 p.m. ET on August 6, 2009, through 11:59 p.m. ET on August 13, 2009. To access the replay, dial 888-286-8010 (toll international: 617-801-6888) and request replay pin number 67405958. A replay of the call will also be available on the Internet at http://www.strategichotels.com orhttp://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 second quarter information section.

Portfolio Definitions

North American hotel comparisons for the second quarter 2009 are derived from the company's hotel portfolio at June 30, 2009, consisting of properties in which operations are included in the consolidated results of the company.

European hotel comparisons for the second quarter 2009 are derived from the company's European owned and leased hotel properties at June 30, 2009.

This press release contains forward-looking statements about Strategic Hotels & Resorts (the "Company"). Except for historical information, the matters discussed in this press release are forward-looking statements subject to certain risks and uncertainties. Actual results could differ materially from the Company's projections. Factors that may contribute to these differences include, but are not limited to the following: economic conditions generally and in the real estate market specifically, including further deterioration of the current global economic downturn and the extent of its effect on business and leisure travel and the lodging industry; demand for hotel rooms in our current and proposed market areas; outbreak of contagious diseases such as the H1N1 virus; our liquidity and refinancing demands; availability of capital; the recovery of financing markets and our ability to obtain or refinance debt; our ability to comply with covenants contained in our debt facilities; rising interest rates and operating costs; rising insurance premiums; cash available for capital expenditures; competition; ability to dispose of existing properties in a manner consistent with our disposition strategy and liquidity needs; delays and cost overruns in construction and development; demand for hotel condominiums; marketing challenges associated with entering new lines of business; risks related to natural disasters; the effect of threats of terrorism and increased security precautions on travel patterns and hotel bookings; the outbreak of hostilities and international political instability; legislative or regulatory changes, including changes to laws governing the taxation of REITs; and changes in generally accepted accounting principles, policies and guidelines applicable to REITs.

Additional risks are discussed in the Company's filings with the Securities and Exchange Commission, including those appearing in the Company's most recent form 10-K and subsequent 10-Qs. Although the Company believes the expectations reflected in such forward-looking statements are based on reasonable assumptions, it can give no assurance that its expectations will be attained. The forward-looking statements are made as of the date of this press release, and we undertake no obligation to publicly update or revise any forward-looking statement, whether as a result of new information, future events or otherwise.

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