Orient-Express Hotels Reports Third Quarter 2009 Net Loss

Hotel Operating Statistics

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. November 05, 2009

HAMILTON, Bermuda, November 3, 2009 - Orient-Express Hotels Ltd. (NYSE: OEH, http://www.orient-express.com), owners or part-owners and managers of 49 luxury hotels, restaurants, tourist trains and river cruise properties operating in 25 countries, today announced its results for the third quarter ended September 30, 2009.

Third Quarter 2009 Earnings Summary

• Third quarter total revenues, excluding Real Estate, of $142.5 million
• Same store RevPAR down 20% in local currency, 26% in US dollars
• Adjusted EBITDA before Real Estate and Impairment of $30.6 million

Key Events
- Windsor Court Hotel, New Orleans sold in October, for $44.3 million, over 50x 2008 EBITDA
- Total proceeds from non-core asset sales now $86.3 million
- Letter of intent signed in October for sale of third non-core hotel asset - Relaunched Hotel das Cataratas, Iguassu Falls, Brazil, upgraded to Orient-Express standards
- Returned refurbished Road to Mandalay river cruise ship in Burma to service
- Commenced conversion of historic convent into 56 key hotel Palacio Nazarenas, Cuzco, Peru, scheduled for completion in 2011
- Sold a further two residential villas at Napasai, Koh Samui, Thailand for $1.7 million

The net loss for the period was $13.0 million (loss of $0.17 per common share) on revenue of $144.2 million, compared with net earnings of $6.4 million ($0.15 per common share) on revenue of $176.7 million in the third quarter of 2008. The net loss from continuing operations for the period was $2.7 million (loss of $0.04 per common share) compared with net earnings from continuing operations of $20.6 million ($0.48 per common share) in the third quarter of 2008. The adjusted net earnings from continuing operations for the period was $1.4 million ($0.02 per common share) compared with adjusted net earnings from continuing operations of $22.6 million ($0.53 per common share) in the third quarter of 2008.

Commenting on the quarter, Paul White, President and Chief Executive Officer said, "The third quarter has again demonstrated the resilience of the Orient-Express business model. Our focus on the high end leisure traveller and our international diversification translated into RevPAR declines that were not as steep as those experienced by the luxury sector in general or the 'big brand' operators that rely heavily on group and corporate business. Nevertheless, the quarter was another challenging trading period for the Company and the industry as a whole.

"During the quarter we continued to expedite the sale of non-core assets, with $86.3 million of sales completed so far this year. A non-binding letter of intent has since been signed for the sale of a third non-core hotel asset, and total proceeds are expected to rise to over $100 million by the end of 2009. The completed sales, coupled with the equity raised in April, has helped to reduce our net debt from $835.3 million at December 31, 2008 to $705.8 million.

"Progress continues on our Real Estate developments in St. Martin. The construction of Porto Cupecoy is nearing completion, with the grand opening scheduled for February 2010. To date the project is nearly 50% sold. We expect the balance of 93 condominiums to be sold over the next two to three years at an anticipated average price of $0.6 to $0.7 million, which will further deleverage the balance sheet.

"Trading has been consistent with our expectations. It is particularly pleasing to see the operational efficiencies continue through the high season, when savings are more challenging in the luxury sector. Again in this quarter, we achieved savings sufficient to offset 47% of the revenue drop, excluding Charleston Place, which was consolidated from January 1, 2009."

Business Highlights

Revenue, excluding Real Estate revenue, was $142.5 million in the third quarter of 2009, down $30.8 million from the third quarter of 2008. On a same store basis, revenue, excluding Real Estate revenue, was down by 22% in US dollars or by $37.7 million.

Revenue from Owned Hotels for the third quarter was $116.5 million, including $10.0 million from Charleston Place. This excludes revenue from Windsor Court Hotel, which has been accounted for as a discontinued operation. On a same store basis, revenue from Owned Hotels declined by 21% year over year. Owned Hotels same store RevPAR declined by 20% in local currency (26% in US dollars).

Trains and Cruises revenue fell by 23% or $7.0 million. These operations have a high variable cost component and EBITDA fell by only $2.6 million.

Adjusted EBITDA before Real Estate and Impairment was $30.6 million compared to $51.3 million in the prior year. The principal variances from the third quarter of 2008 included results from owned hotels in Italy (down $3.9 million), Reid's Palace, Madeira (down $1.2 million), Grand Hotel Europe, St Petersburg (down $2.9 million), La Residencia, Mallorca (down $1.8 million), La Samanna, St. Martin (down $1.2 million), Orient-Express Safaris, Botswana (down $1.2 million), and the Venice Simplon-Orient-Express (down $2.7 million).

The results for the third quarter include a non-cash fixed asset impairment charge of $9.8 million relating to the Company's ownership of Lilianfels Blue Mountains, Katoomba, Australia.

During the quarter, work started on a fully-financed $14.1 million, 56 key hotel Palacio Nazarenas, Cuzco, Peru, scheduled for completion in 2011. The hotel, a conversion of an historic convent, will complement our next door Hotel Monasterio with a presidential suite, 29 junior suites, 9 suites and 17 deluxe oxygen-enriched rooms.

The entirely refurbished Road to Mandalay river cruise ship in Burma returned to service in August 2009, after an absence of more than 12 months, following damage sustained during Cyclone Nargis. A new Governor's Suite and five additional state cabins have been created. Deluxe cabins have been reduced in number and expanded to improve the guest experience.

Regional Performance

Europe: In the third quarter, revenues from Owned Hotels were $67.5 million, down 23% from $88.1 million in the third quarter of 2008. EBITDA was $25.6 million in 2009 versus $35.9 million in the prior year. Same store RevPAR decreased by 18% in local currency (26% in US dollars). Overall the Italian hotels experienced a 12% fall in local currency RevPAR (19% in US dollars). Reid's Palace, which is heavily dependent on the weakened UK outbound market experienced a 35% fall in local currency RevPAR (39% in US dollars). Similarly, La Residencia, which is also largely dependent on the UK market, experienced a 31% fall in local currency RevPAR (36% in US dollars). Grand Hotel Europe, St Petersburg continued to be adversely affected by the global recession and suffered a 28% fall in local currency RevPAR (44% in US dollars). The depreciation of the rouble had a $1.4 million adverse impact on the hotel's EBITDA.

North America: Revenue was $19.9 million, including $10.0 million with respect to Charleston Place, South Carolina which was consolidated from January 1, 2009. Excluding this hotel, revenue was 25% lower than the third quarter of 2008. Excluding EBITDA of $1.8 million from Charleston Place, there was an EBITDA decrease of $2.2 million. Same store RevPAR for the region fell by 31%. The region includes La Samanna, St. Martin, which was significantly impacted by the economic downturn as well as the closure of the property for one week due to a hurricane threat. Consequently, the hotel suffered a 41% fall in RevPAR.

Southern Africa: Revenue of $7.2 million was 29% lower year over year, and EBITDA of $1.1 million was 58% lower than in the third quarter of 2008.

South America: Revenue decreased by 10% to $11.3 million in the third quarter of 2009, from $12.5 million in the third quarter of 2008. EBITDA was $0.9 million, compared to $1.9 million last year. Copacabana Palace had a RevPAR decrease of 19% in local currency, and EBITDA was down by $0.5 million. The region's EBITDA results were impacted by a $1.6 million EBITDA loss at Hotel das Cataratas which was relaunched under the Orient-Express brand in October 2009.

Asia Pacific: Revenue for the third quarter of 2009 was $10.7 million, a decrease of 2% year over year. EBITDA was $2.8 million compared to $2.2 million in the third quarter of 2008. Same store RevPAR in local currency for the region fell by 4% from $172 to $166.

Hotel management and part-ownership interests: EBITDA for the third quarter of 2009 was a loss of $0.1 million compared to a profit of $4.7 million in the third quarter of 2008, which included $3.1 million of EBITDA from Charleston Place.

Restaurants: Revenue from restaurants in the third quarter of 2009 was $2.2 million compared to $2.9 million in the same quarter of 2008, and EBITDA was a loss of $0.5 million compared with a loss of $0.3 million in 2008.

Trains and Cruises: Revenue was down $7.0 million in the third quarter of 2009, a decrease of 23% year over year, and EBITDA was down by $2.6 million, reflecting the high level of variable costs in the trains business.

Central costs: In the third quarter of 2009, central costs were $7.4 million compared with $6.2 million in the prior year period. In the quarter, there was a $0.5 million increase in the cost of non-cash equity-compensation awards.

Depreciation and amortization: The depreciation and amortization charge for the third quarter of 2009 was $11.0 million compared with $8.9 million in the third quarter of 2008. The current year quarter includes $1.9 million relating to Charleston Place, which was consolidated from January 1, 2009.

Interest: The interest charge for the third quarter of 2009 was $7.8 million compared with $10.9 million in the third quarter of 2008.

Tax: The tax charge for the quarter was $7.9 million compared to a charge of $8.2 million in the same quarter in the prior year. The third quarter 2009 tax charge includes a deferred tax charge of $1.7 million arising in respect of fixed asset timing differences following appreciation of certain local currencies against the US dollar in the quarter. There was also a benefit to deferred tax of $2.9 million in respect of the impairment charge in the quarter.

Discontinued Operations: The charge in the third quarter of 2009 was $10.3 million. Discontinued operations in the third quarter include the results of Windsor Court Hotel, New Orleans, Bora Bora Lagoon Resort and La Cabana, Buenos Aires. The charge included an operating loss in the quarter of $0.4 million and impairment charges, net of tax, of $5.4 million relating to La Cabana and $4.5 million relating to Bora Bora Lagoon Resort.

Investment: Capital expenditure in the third quarter was $10.4 million which was necessary to complete projects at, in particular, Grand Hotel Europe and Copacabana Palace. This also included $5.9 million for Road To Mandalay, which is fully covered by insurance. There was an additional $9.0 million deposit for the New York hotel project. In addition, the Company invested $8.9 million during the quarter in the Company's development at Porto Cupecoy and $3.5 million was invested in Hotel das Cataratas.

Liquidity and Capital Reserves

At September 30, 2009, the Company had total debt of $830.1 million, working capital loans of $8.4 million and cash balances of $132.8 million (including $17.8 million of restricted cash), giving a total net debt of $705.8 million compared with total net debt of $683.9 million at the end of the second quarter of 2009. Additionally, at September 30, 2009, Other Liabilities Held for Sale included $36.8 million of debt relating to The Windsor Court Hotel, which was repaid in October when the hotel was sold.

At September 30, 2009, undrawn amounts available to the Company under committed short-term lines of credit were $25.0 million and undrawn amounts available to the Company under secured revolving credit facilities were $12.0 million, bringing total cash availability at September 30, 2009, to $169.8 million, including restricted cash of $17.8 million.

At September 30, 2009, approximately 56% of the Company's debt was at fixed interest rates and 44% was at floating interest rates. The weighted average maturity of the debt was approximately 2.7 years and the weighted average interest rate (including margin) was approximately 3.5%.

Outlook

"As we enter the low season period, we see business conditions continuing to stabilize. Bookings remain very last minute, a trend we expect to continue into 2010", said Paul White. "We maintain our tight control of costs and capital expenditures and are pursuing the sale of non-core assets and developed Real Estate in line with our strategy. Having achieved key milestones in all three of these areas, with further progress expected in the coming months, the Company can now begin to evaluate growth opportunities in management, ownership or a combination of both. Our aim continues to be to deleverage the Company significantly by the end of 2011, with a targeted 4-5 times ratio of debt to EBITDA on a stabilized basis."