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www.orient-express.com
HOTEL CIPRIANI
Venice, Italy
PALAZZO VENDRAMIN
Venice, Italy
HOTEL SPLENDIDO
Portofino, Italy
VILLA SAN MICHELE
Florence, Italy
CAPANNELLE
Tuscany, Italy
HOTEL CARUSO
Ravello, Italy
HOTEL RITZ
Madrid, Spain
LA RESIDENCIA
Deià, Mallorca, Spain
LAPA PALACE
Lisbon, Portugal
REID'S PALACE HOTEL
Madeira, Portugal
HÔTEL DE LA CITÉ
Carcassonne, France
GRAND HOTEL EUROPE
St Petersburg, Russia
HARRY’S BAR
London, England
LE MANOIR AUX QUAT’SAISONS
Chef-Proprietor Raymond Blanc
Oxfordshire, England
‘21’ CLUB
New York, New York
INN AT PERRY CABIN
St Michaels, Maryland
KESWICK HALL
Charlottesville,Virginia
WINDSOR COURT HOTEL
New Orleans, Louisiana
CHARLESTON PLACE
Charleston, South Carolina
EL ENCANTO
Santa Barbara, California
MAROMA RESORT AND SPA
Riviera Maya, Mexico
LA SAMANNA
St Martin, French West Indies
MOUNT NELSON HOTEL
Cape Town, South Africa
THE WESTCLIFF
Johannesburg, South Africa
ORIENT-EXPRESS SAFARIS
Eagle Island Camp, Botswana
ORIENT-EXPRESS SAFARIS
Khwai River Lodge
Botswana
ORIENT-EXPRESS SAFARIS
Savute Elephant Camp
Botswana
THE OBSERVATORY HOTEL
Sydney, Australia
LILIANFELS BLUE MOUNTAINS
Katoomba, New South Wales,
Australia
PANSEA HOTELS & RESORTS
Siem Reap, Bali, Koh Samui,
Luang Prabang,Yangon,
Southeast Asia
COPACABANA PALACE
Rio de Janeiro, Brazil
LA CABAÑA
Buenos Aires, Argentina
MIRAFLORES PARK HOTEL
Lima, Peru
HOTEL MONASTERIO
Cuzco, Peru
MACHU PICCHU
SANCTUARY LODGE
Machu Picchu, Peru
BORA BORA LAGOON
RESORT & SPA
Bora Bora, French Polynesia
PERURAIL
Peru
VENICE SIMPLON-ORIENT-EXPRESS
London, Paris,Venice
BRITISH PULLMAN
South of England
NORTHERN BELLE
North of England
THE ROYAL SCOTSMAN
Scotland
EASTERN & ORIENTAL EXPRESS
Southeast Asia
ROAD TO MANDALAY
Irrawaddy River, Burma
(Myanmar)
AFLOAT IN FRANCE
France
3470-AR-04
HOTEL SPLENDIDO MARE
Portofino, Italy
Orient-Express Hotels Ltd. Annual Report 2004
Orient-Express Hotels Ltd.
Orient-Express Hotels Ltd.
2004 A NNUAL R EPORT
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Reservation information
Afloat in France
Burgundy and Languedoc, France
U.K. telephone: +44 20 7960 0500
Fax: +44 20 7805 5908
U.S. telephone: +1 401 351 7518
Fax: +1 401 351 7220
Bora Bora Lagoon Resort & Spa
Tahiti, French Polynesia
Telephone: +689 60 40 00
Fax: +689 60 40 03
British Pullman
South of England
U.K. telephone: +44 20 7960 0500
Fax: +44 20 7805 5908
U.S. telephone: +1 401 351 7518
Fax: +1 401 351 7220
Copacabana Palace
Rio de Janeiro, Brazil
Telephone: +55 21 2548 7070
Fax: +55 21 2235 7330
La Résidence Phou Vao
Luang Prabang, Laos
Telephone: +856 71 21 2194
Fax: +856 71 21 2534
The Governor’s Residence
Yangon, Myanmar
Telephone: +951 229 860
Fax: +95 1 228 260
Eastern & Oriental Express
Southeast Asia
U.K. telephone: +44 20 7960 0500
Fax: +44 20 7805 5908
U.S. telephone: +1 401 351 7518
Fax: +1 401 351 7220
La Residencia
Deià, Mallorca, Spain
Telephone: +34 971 63 90 11
Fax: +34 971 63 93 70
The Inn at Perry Cabin
St Michaels, Maryland
Telephone: +1 410 745 2200
Fax: +1 410 745 3348
La Samanna
St Martin, French West Indies
Telephone: +590 590 87 6400
Fax: +590 590 87 8786
The Observatory Hotel
Sydney, Australia
Telephone: +61 2 9256 2222
Fax: +61 2 9256 2233
Le Manoir aux Quat’Saisons
Oxfordshire, England
Telephone: +44 1844 278881
Fax: +44 1844 278847
The Orient-Express Gift Collection
London, England
Telephone: +44 20 7805 5019
Fax: +44 20 7805 5909
Lilianfels Blue Mountains
Katoomba, Australia
Telephone: +61 2 4780 1200
Fax: +61 2 4780 1300
The Royal Scotsman
Edinburgh, Scotland
U.K. telephone: +44 131 555 1344
Fax: +44 131 555 1345
U.S. telephone: +1 800 922 8625
Hotel Caruso
Ravello, Italy
Telephone: +39 0185 267898
Fax: +39 0185 267899
2
16
Chief Financial Officer’s report
3
Financial highlights
18
Awards received in 2004
4
Directors and management team
19
Financial review
6
Chairman’s message
44
Shareholder and investor information
8
President’s overview of performance
45
Reservation information
Above: Afloat in France operates five pénichehôtels – luxuriously-converted canal boats – which
travel through exceptional landscapes in Languedoc,
Burgundy and Provence. Arguably the most relaxed
and sybaritic way of experiencing the French
countryside, these lavishly equipped craft link great
cities with remote villages, traveling past forests,
fields and world-renowned vineyards. Guests enjoy
the services of a full crew on board, who serve
exceptional regional cuisine and arrange visits to
local sights.
Lapa Palace
Lisbon, Portugal
Telephone: +351 21 394 9494
Fax: +351 21 395 0665
Reid’s Palace
Funchal, Madeira, Portugal
Telephone: +351 291 71 7171
Fax: +351 291 71 7177
La Résidence d’Angkor
Siem Reap, Cambodia
Telephone: +855 63 963 390
Fax: +855 63 963 391
Harry’s Bar
London, England (A private club)
Company profile
La Cabaña
Buenos Aires, Argentina
Telephone and fax: +54 11 4814 0001
PeruRail
Hiram Bingham train, Cuzco-Machu Picchu
Telephone: +51 84 238 722
Fax: +51 84 221 114
Charleston Place
Charleston, South Carolina
Telephone: +1 843 722 4900
Fax: +1 843 722 0728
Grand Hotel Europe
St Petersburg, Russia
Telephone: +7 812 329 6000
Fax: +7 812 329 6001
3
Keswick Hall
Charlottesville,Virginia
Telephone: +1 434 979 3440
Fax: +1 434 977 4171
Orient-Express Safaris
Eagle Island Camp, Khwai River Lodge,
Savute Elephant Camp
Botswana, Southern Africa
Telephone: +27 11 274 1800
Fax: +27 11 481 6065
Road To Mandalay
Mandalay, Myanmar
U.K. telephone: +44 20 7960 0500
Fax: +44 20 7805 5908
U.S. telephone: +1 401 351 7518
Fax: +1 401 351 7220
El Encanto Hotel & Garden Villas
Santa Barbara, California
Currently under development.
Contents
Jimbaran Puri Bali
Bali, Indonesia
Telephone: +62 361 701 605
Fax: +62 361 701 320
Machu Picchu Sanctuary Lodge
Machu Picchu, Peru
Telephone: +51 84 21 1038
Fax: +51 84 21 1053
Hotel Cipriani and
Palazzo Vendramin
Venice, Italy
Telephone: +39 0 41 520 7744
Fax: +39 0 41 520 3930
Maroma Resort and Spa
Riviera Maya, Mexico
Telephone: +52 998 872 8200
Fax: +52 998 872 8220
Hôtel de la Cité
Carcassonne, France
Telephone: +33 468 71 98 71
Fax: +33 468 71 50 15
Miraflores Park Hotel
Lima, Peru
Telephone: +51 1 242 3000
Fax: +51 1 242 3393
Hotel Monasterio
Cuzco, Peru
Telephone: +51 84 24 1777
Fax: +51 84 24 6983
Mount Nelson Hotel
Cape Town, South Africa
Telephone: +27 21 483 1000
Fax: +27 21 483 1782
Hotel Ritz
Madrid, Spain
Telephone: +34 91 701 67 67
Fax: +34 91 701 67 76
Napasai
Koh Samui,Thailand
Telephone: +66 77 42 92 00
Fax: +66 77 42 92 01
Hotel Splendido and
Splendido Mare
Portofino, Italy
Telephone: +39 0185 267 800
Fax: +39 0185 267 804
Northern Belle
U.K.
U.K. telephone: +44 20 7690 0500
Fax: +44 20 7805 5908
U.S. telephone: +1 401 351 7518
Fax: +1 401 351 7220
www.orient-express.com
The Westcliff
Johannesburg, South Africa
Telephone: +27 11 646 2400
Fax: +27 11 646 3500
‘21’ Club
New York, New York
Telephone: +1 212 582 7200
Fax: +1 212 581 7138
Ubud Hanging Gardens
Bali, Indonesia
Telephone: +62 361 701 605
Fax: +62 361 701 320
Venice Simplon-Orient-Express
London-Paris-Venice
U.K. telephone: +44 20 7960 0500
Fax: +44 20 7805 5908
U.S. telephone: +1 401 351 7518
Fax: +1 401 351 7220
Villa San Michele
Florence, Italy
Telephone: +39 0 55 567 8200
Fax: +39 0 55 567 8250
Windsor Court Hotel
New Orleans, Louisiana
Telephone: +1 504 523 6000
Fax: +1 504 596 4513
ORIENT-EXPRESS HOTELS LTD.
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Orient-Express Hotels Ltd.
Orient-Express Hotels owns or part-owns,
and mostly manages, 49 leisure properties in
25 countries.Thirty-eight are hotels ranging
across five continents, from the Hotel
Cipriani in Venice to the Mount Nelson in
Cape Town, the Copacabana Palace in Rio de
Janeiro, the Observatory in Sydney, and
Charleston Place in Charleston, S.C.
Restaurants include ‘21’ Club in New York,
Le Manoir aux Quat’Saisons in Oxfordshire,
England, La Cabaña in Buenos Aires and
Harry’s Bar (a private club) in London. Six
tourist trains include the legendary Venice
Simplon-Orient-Express in Europe and the
Eastern & Oriental Express in Asia.The
company also part-owns and manages PeruRail
in Peru, which operates the Cuzco-Machu
Picchu train service used by nearly every tourist
to Peru (there are no roads to the famous
Inca ruins and otherwise it is a four-day hike).
The m.v. Road To Mandalay provides luxury
cruises on the Irrawaddy River in Myanmar.
The company started in 1976 as the leisure
division of Sea Containers Ltd. and was later
incorporated as Orient-Express Hotels Ltd.,
a Bermuda company. Orient-Express Hotels
was floated on the New York Stock
Exchange in August, 2000. Sea Containers
presently owns 25% of the company and plans
to sell its remaining shares in due course.
Orient-Express Hotels seeks out unique
properties which have expansion potential.
It owns or part-owns its properties because
it believes that equity returns are greater
than simply management fee income.
Increases in property values allow the
company to increase funding against those
assets and thus fuel expansion.The unique
nature of the assets insulates against
competition and therefore allows greater
pricing flexibility.
The company avoids the use of a chain
brand.Thus, none of its properties are
branded “Orient-Express” (except the train
and safari camps). Management believes that
discriminating travelers will choose an
individual property of fame in priority to a
chain brand. In the few locations where the
company competes with de luxe brand
chains (Venice, Lisbon and Rio de Janeiro
are examples) it achieves up to 40% higher
average rates than the chain brand hotels.
Financial highlights
Revenue
(1) (2)
EBITDA
Front cover: Orient-Express Hotels recently
welcomed the Grand Hotel Europe,
St Petersburg, to its ever-expanding portfolio.
This 130-year-old property is ideally placed for
the city’s top cultural attractions. A glamorous,
belle-époque building decorated with an
impressive collection of more than 200 works
of art, it boasts 301 guest rooms and six
restaurants serving cuisine ranging from classic
European dishes to local specialties at its
renowned Caviar Bar.
Net earnings
(2)
Earnings per
common share
Number of
shares (million)
(1)
(2)
(2)
2004
$000
2003
$000
Change %
357,284
315,863
13
79,016
69,130
14
28,222
23,609
20
$0.82
$0.76
8
34.30
31.14
10
See page 42.
Includes in 2003 a gain on sale of hotel asset of $4,250,000.
ORIENT-EXPRESS HOTELS LTD.
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Directors
From left to right
Daniel J. O’Sullivan
Senior Vice President – Finance and
Chief Financial Officer (retired) of
Sea Containers Ltd.
John D. Campbell *
Senior Counsel (retired) of Appleby
Spurling Hunter (attorneys).
Mr Campbell was a member of
the firm until 1999, and is also a
Director of Sea Containers Ltd.
James B. Sherwood
Chairman of the company.
Mr Sherwood is also a Director and
President of Sea Containers Ltd.
Simon M.C. Sherwood
President of the company.
Previously Senior Vice President –
Leisure of Sea Containers Ltd.
(1997-2000) and was originally
appointed Vice President in 1991,
prior to which he was Manager,
Strategic Consulting of Boston
Consulting Group (1986-1990).
Georg R. Rafael
Managing Director of Rafael Group S.A.M.
Previously Vice Chairman – Executive
Committee of Mandarin Oriental
Hotels (2000-2002). Managing
Director and founder of Rafael
Hotels (1986-2000) and Joint
Managing Director of Regent
International Hotels (1972-1986).
J. Robert Lovejoy *
Senior Managing Director of
Ripplewood Holdings LLC (a private
equity investment firm).
Prior to joining Ripplewood, Mr
Lovejoy was Managing Director of
Lazard Frères & Co. LLC and a
General Partner of the predecessor
partnership for over 15 years.
James B. Hurlock *
Partner (retired) of White & Case LLP
(attorneys).
Mr Hurlock was Chairman of the
Management Committee of White &
Case LLP (1980-2000), overseeing the
firm’s worldwide operations.
*Member of the Audit Committee
4
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Management team
Back row from left to right
Paul White Vice President – Hotels, Africa,
Australia and South America. Previously a manager
of the company working on hotel financial and
operational matters, having joined from Forte
Hotels in 1991.
James G. Struthers Vice President – Finance and
Chief Financial Officer. Joined the company in
2000. Previously Finance Director of Eurostar UK
Ltd. (1997-1999). Worked with Sea Containers
Ltd. as Controller (1991-1996), having qualified
as a chartered accountant with KPMG in 1986.
David C.Williams Vice President – Sales &
Marketing. Joined the company in 1981 and
served as Commercial Director responsible for
strategic marketing developments and business
initiatives in the Americas, Europe and AsiaPacific. Previously with Carlson Marketing
Group.
Dean P. Andrews Vice President – Hotels,
North America. Joined the company in 1997,
having been previously with Omni Hotels
(1981-1997) working in new hotel development
and financial and asset management.
Nicholas R.Varian Vice President – Trains and
Cruises. Joined Orient-Express Hotels in 1985
from P&O Steam Navigation Company and
became Vice President responsible for train
and cruise activities in 1989.
Roger V. Collins Vice President – Technical
Services. An engineer his entire career, he has
worked in the hotel industry since 1979 with
Grand Metropolitan Hotels, Courage Inns and
Taverns, and Trusthouse Forte Hotels, joining
Orient-Express Hotels in 1991.
Edwin S. Hetherington Secretary. Also Vice
President, General Counsel and Secretary
of Sea Containers Ltd., having joined
Orient-Express Hotels in 1980.
Front row seated
Adrian D. Constant Vice President – Hotels,
Europe. Joined the company from Le Meridien
Hotels in 2001, where he had responsibility for
the development of its hotels in South America.
He has also managed hotels in the Algarve,
Malta, London and Madrid.
Pippa Isbell Vice President – Public Relations.
Joined the company in 1998 after selling the
public relations consultancy she founded in
1987, which had clients such as Inter-Continental
Hotels, Forte, Hilton International, Jarvis Hotels,
and Millennium and Copthorne.
Natale Rusconi
Vice President.
Appointed Managing
Director of Hotel Cipriani,
Venice, in 1977 and
responsible for making
Hotel Cipriani one of the
world’s top luxury hotels.
Previously at the Savoy
Hotel and with CIGA
Hotels.
ORIENT-EXPRESS HOTELS LTD.
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Chairman’s message
April 1, 2005
Dear Shareholder
2004 was a year of excellent earnings growth
for your company. Excluding the gain on sale
of a hotel in 2003, net earnings in 2004 were
46% higher than in 2003, reaching $28.2
million ($0.82 per common share) on revenue
of $357.3 million. Revenue was up 13% from
the prior year. This having been said, our net
earnings still did not surpass the $40 million
of 2000, nor do they take into account the
capital investment made since 2000, so there
is considerable upside to come. As revenue
rises through increased occupancy and higher
rates, a greater proportion will fall to the
bottom line. This is one of the reasons why a
13% revenue gain translated into a 46% net
earnings increase in 2004.
Our key financial indicators for 2004 were:
a RevPAR of $213 vs. $184 in 2003, an increase
of 16%; EBITDA was $79 million vs. $65 million
(excluding gain on sale of a hotel); long-term
debt (excluding the current portion) to equity
ratio was 1:1 with current assets equalling
current liabilities; year-end cash and undrawn
credit facilities were $98 million compared
with $149 million at the end of 2003.
The company made a number of new
investments in 2004 plus the major
investment in the Grand Hotel Europe in
St Petersburg, Russia in February, 2005. In
addition, it invested $65 million in existing
properties. Because of the cash expended in
connection with these transactions, it was
deemed prudent to enlarge the capital base
in March, 2005 by selling 5.05 million class A
common shares at $25.54 per share. This
should give the company the freedom to
make further attractive acquisitions and capital
improvements in coming years, while
maintaining balance in the company’s key
financial ratios.
In addition to the Grand Hotel Europe
investment in early 2005, the company in
2004 committed $8 million through a
convertible loan to the Pansea group in
Southeast Asia (EBITDA of Pansea doubled
in 2004 over 2003 to $2.4 million), we
acquired El Encanto in Santa Barbara,
California in November, 2004 for $26 million
and we bought a 50% interest in Afloat in
France in May, 2004 for $3 million (with an
option to acquire the other 50%). All these
acquisitions fit the company’s strategy of
only investing in unique properties. The list
of investments in existing properties is
too long to recite here, but needless to say,
we believe it will convert quickly into
increased profitability.
Our diversity of investment by region and
product (hotels, restaurants and tourist trains)
has served us well. While European hotel
earnings in 2004 were flat due to the strength
of the euro and British pound, earnings from
tourist trains soared and made Europe as a
whole significantly more profitable in 2004
than in 2003. All other regions outperformed
2003 in 2004 but in making this comparison
EBITDA ($ millions)
EBITDA Total $ millions
2004
Owned hotels – Europe
2003 Change %
29.9
32.8
(8.8)
North America
15.0
11.1
34.7
Rest of the World
18.1
11.1
63.0
Total owned hotels
63.0
55.0
14.4
Management and
part-ownership interests
14.9
13.5
10.4
3.9
2.6
49.5
81.8
71.1
14.9
Restaurants
Total hotels and restaurants
13.0
6.0
118.2
Central overheads
(15.8)
(12.2)
(29.2)
Total EBITDA
79.0
69.1
Trains and cruises
Gain on sale of Quinta do Lago
–
79.0
4.3
69.1*
14.3
2003
* Figures in 2003 include $4.25 million from gain on sale of the Hotel Quinta do Lago in November 2003.
6
we need to take into account the SARS
epidemic and the Iraq war in 2003 which
both affected travel.
We are particularly pleased with our
investments in Latin America. Travel to Peru,
Brazil, Argentina and Mexico where we have
properties, has increased not only from the
US but from Europe and by nationals living in
Latin America. We are currently looking at
three hotel acquisitions in Latin America but it
is too early to say whether any will come to
fruition. Our luxury tourist train, the Hiram
Bingham, introduced in 2004 on the CuzcoMachu Picchu route in Peru, has proven very
popular. Our plan to convert the Lake
Titicaca steamer ss. Ollanta into an overnight
cruise ship has been abandoned as the cost
of conversion proved to be too high, so the
vessel will be retained in its present state for
day excursions. We own a property in the
Colca Canyon in Peru which is earmarked
for development into a hotel when access
2004
Above:The Casanova Spa at Hotel Cipriani overlooks
beautiful gardens where vines named after the
legendary seducer are planted. Managed by Babor,
the spa is an elegant retreat enhanced by locally
made features such as Murano glass chandeliers.
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problems can be resolved. This spectacular
valley is the home of the condor, the largest
bird in the world.
In North America, the focus of our
attention is our residential village development
at La Samanna in St Martin, addition of rooms
at Maroma Resort and Spa on the Riviera
Maya in Mexico, construction of an annex for
conferences and banqueting at the Windsor
Court in New Orleans and renovation of
El Encanto in Santa Barbara, California.
In Europe, the restoration of the Hotel
Caruso in Ravello, Italy is well advanced and
the hotel will reopen this summer. The Grand
Hotel Europe in St Petersburg is in excellent
physical condition but we will want to
redecorate the property.
No significant investment is required in
2005 in our South Pacific hotels following
completion of improvements to Bora Bora
Lagoon Resort & Spa and Lilianfels. In Asia,
Pansea will be opening the Ubud Hanging
Gardens Hotel in Bali in July and is currently
completing a renovation of its Jimbaran Puri
beach hotel also in Bali.
We are acquiring a 50% interest in the
Royal Scotsman tourist train in April, 2005
for $2.7 million and have an option to acquire
the other 50%.
We continue to follow two policies that
differentiate us from many of our
competitors. We do not manage properties
unless we hold an equity interest, usually 50%
or more, in them. We do this for two
reasons. First, we want to realize the benefit
of increasing property values and secondly we
want to decide on physical improvements.
When management and ownership are
divorced the two interests are not always in
alignment. Second, we do not brand our
properties “Orient-Express” but instead
promote them under their individual names
which we believe adds value through
exclusiveness and rate setting. We do,
however, centrally market the properties
through the Orient-Express Hotels,Trains &
Cruises trade name.
Our largest shareholder, Sea Containers
Ltd., has recently sold down part of its holding
in conjunction with our primary share issue,
and now owns 25% of Orient-Express Hotels.
Sea Containers has indicated that its
intention is to exit entirely its investment in
Orient-Express Hotels in due course.
Our results for 2004 were achieved
through the hard work of our 5,500 staff in
25 countries. In recognition of his formative
role in the company, Dr Natale Rusconi,
Above: Planet at the Mount Nelson Hotel is
Cape Town’s most elegant new bar. Guests sip
champagne at an onyx, underlit bar and relax
on leather banquettes beneath a fiber optic Milky
Way and a mobile of the solar system.
General Manager of the Hotel Cipriani in
Venice (our first hotel) and the person who
introduced me to the hotel business, was
made a Vice President in 2004. David C
Williams was promoted to Vice President –
Sales and Marketing during the year.
Barring unforeseen events, 2005 and 2006
appear to be very promising for your company.
Sincerely,
James B. Sherwood
Chairman & Founder
ORIENT-EXPRESS HOTELS LTD.
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President’s overview of performance
Hotels: Europe
Same store RevPAR in local currency was up
2% allowing us no more than to hold ground
against inflation. As a result EBITDA on a
same store basis was flat at about $30 million
(the 2003 results include over $3 million of
EBITDA from the Hotel Quinta do Lago
generated during the year prior to its sale).
Given the difficult trading conditions at many
of our hotels we are quite pleased with this
performance. The strength of the euro, up
another 11% over the year, continues to be a
challenge and has reduced the percentage of
U.S. guests to about 25%, well down from
historic levels. Our U.S. bookings showed
some growth in 2004 but there is unlikely to
be a major recovery with the dollar so weak.
Our most exciting development is that
in February 2005 we acquired the majority
interest in the Grand Hotel Europe, St
Petersburg (301 keys) – the residual 6%
continues to be owned by the City of
St Petersburg. This is Russia’s most famous
hotel and recently celebrated its 130th
birthday. It is located in the heart of the city
on Nevsky Prospekt attracting both tourists
and business travelers. In 2004 it generated
EBITDA of about $17 million and our
investment was made at an EBITDA multiple
of about six, so this investment will
immediately add to the company’s earnings.
In addition it should help us build Russian
outbound business for our other properties.
Italy
Work is well advanced at the Hotel Caruso
in Ravello and the property should open in
a few months’ time for the high season. The
hotel really will be stunning with magnificent
views out over the Amalfi coast and a
spectacular pool set in historic gardens. The
design includes a large number of suites, as
these are so popular (and profitable) at our
other Italian hotels. This project has taken
many years to complete due to the strict
development regulations in the area. These
limitations make it difficult for anybody to add
new hotels so over the next few years we are
confident our investment in the Caruso will
generate very attractive returns.
At the Hotel Cipriani and Palazzo
Vendramin (104 keys) EBITDA increased
8
another $0.5 million in spite of the strong
euro acting as a deterrent to U.S. guests. We
continue to invest in improvements at the
hotel. The new spa has been well received
and this last winter we have enhanced many
rooms by adding balconies and we have
created the Dogaressa suite with views over
St Mark’s Square.
The Hotel Splendido and Splendido Mare
(81 keys) fully justified our investments of last
winter with RevPAR up 15% in euros (26% in
dollars) and EBITDA growing by $1 million.
The Villa San Michele (45 keys) had a
tougher year and we had to show more
flexibility with rates than in the past but EBITDA
held at $2.9 million similar to the result in
2003. With so much going on at the Caruso
and Cipriani we are not planning any major
changes this year at our other Italian hotels.
Spain
The Hotel Ritz (167 keys) showed good
progress, increasing its market penetration and
revenue share in Madrid. However this was
more than offset by a generally weak market
that also suffered in the aftermath of the
terrorist bomb attacks in the city. We have
lifted service standards at the hotel and are
Above: The newly designed Medieval Room at
Hôtel de la Cité embodies all the history and
magic of the ancient citadel of Carcassonne.
With its rich wood paneling, hand-carved canopy
bed and crackling log fire, it takes visitors back to
the days when knights in armour rode through
the fortress town. This spectacular guest room
is just one of the hotel’s many memorable
accommodations, which include suites with private
terraces overlooking the French countryside.
now starting to make physical improvements.
The lobby and reception area have been
refurbished and major works should start on
the rooms this summer.
Our new suites at La Residencia (59
keys) in Mallorca have been a great success
with the hotel’s average room rate going up
11% in euros (22% in dollars). This underlines
the value of our permits to add up to 20
additional suites. This winter we worked on
the central guest areas making improvements
to the lounges and adding a new elevator to
improve access to the main pool.
Portugal
Portugal had another difficult year with
occupancy and EBITDA down at both our
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Grand Hotel Europe
Harry’s Bar
Le Manoir aux Quat’Saisons
hotels. International demand has been
affected by the strong euro and domestic
demand is lackluster due to a local recession.
We hope that we are seeing the bottom of
the cycle and are beginning to see bookings
pick up.
Madeira has suffered as a destination and
we saw a decline in demand at Reid’s Palace
(164 keys) particularly from U.K. tour
operators. Even in these hard times the hotel
continues to generate 8% EBITDA return on
investment with, of course, a much higher
return on our equity. To compete better as a
destination Madeira needs improved access
and we are doing what we can to encourage
the authorities to attract one of the low-cost
European airlines to provide a service from
the U.K.
The Lapa Palace (109 keys) in Lisbon
also had a challenging 2004 but demand is
starting to pick up and we recently received
confirmation that two low-cost airlines will
offer a U.K.-Lisbon service from July 2005.
Our hotel stands head and shoulders above
the competition and should do very well
once general demand for Lisbon recovers.
Other European hotels
At Le Manoir aux Quat’Saisons (32 keys) ,
the famed chef Raymond Blanc has great
plans for 2005 as it is the 21st birthday of the
hotel. He is creating a new Asian garden to
provide fresh ingredients for his menu. He
and his team’s energy and creativity should
Hotel Splendido and
Hotel Splendido Mare
Hôtel de la Cité
Lapa Palace Hotel
Hotel Cipriani and
Palazzo Vendramin
Hotel Ritz
Villa San Michele
Reid’s Palace Hotel
Hotel Caruso
La Residencia
continue to stimulate new demand and their
effort was rewarded in 2004 with a number
of major honors including Best British Hotel
(Condé Nast Traveler, U.S.). The restaurant has
received a two-star Michelin rating every year
for the last 20 years.
Hôtel de la Cité (61 keys) showed a
modest improvement in profitability over
2003 helped by a lift in occupancy. During
2004 we refurbished one of the suites in
the oldest part of the building to reflect its
medieval heritage. We also added terraces
to three other suites.
Owned Hotels: Europe
2004
2003
29.9
32.8
Average daily rate ($) 626
493
Rooms sold (‘000)
108
139
RevPAR ($)*
342
280
346
307
EBITDA ($ millions)
Overall –
Same store** RevPAR ($)
RevPAR change
(in U.S.$)
RevPAR change
(in local currency)
+13%
+2%
* RevPAR = Revenue per available room (the rooms
department revenue divided by the number of lettable hotel
rooms for each night of operation). ** Comparison of the same
units’ operations, e.g. excluding the effect of any acquisitions.
Below: Portofino’s best address is the recently restored Presidential Suite at Hotel Splendido, with three
generous terraces overlooking lush gardens and the picturesque harbor beyond. The spacious interior is a
feast for the eyes, decorated in delicate pastel colors that complement the dramatic Mediterranean setting.
9
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Hotels: North America
(including the Caribbean and
Mexico)
The recovery continued in 2004 for North
America with same store RevPAR up 8%
and EBITDA up 35%. Demand steadily
strengthened through the year and in the
fourth quarter same store RevPAR was
up 18% with demand (and bookings) strong
for 2005.
‘21’ Club
The Inn at Perry Cabin
Keswick Hall
El Encanto
Charleston Place
U.S.A.
In November 2004, we broadened our
presence in the U.S. with the acquisition of
El Encanto Hotel (88 keys) in Santa Barbara
for $26 million. This charming hotel is set
above the Mission with views over the coast.
The purchase price is less than $300,000 per
key and includes rights to add another nine
keys and to expand the central public areas.
We will close the hotel during the low season
to start this work. This is our first property in
the area and it should help increase
awareness of Orient-Express Hotels in the
important west coast markets.
EBITDA at the Windsor Court Hotel
(324 keys) grew 9% on the back of improved
RevPAR and a very effective cost-containment
program. The third quarter was affected by
Hurricane Ivan, which led to some last minute
group cancelations, but the end of the year
was particularly strong and this has continued
through the early months of 2005. With
demand recovering we are pushing ahead
with the addition of more meeting space.
We also plan to create some club floors and
add a spa.
Bookings at Charleston Place (442 keys)
look strong for 2005, another sign of demand
recovery in the U.S. EBITDA was slightly up
for 2004 and we expect further improvement
in 2005. Our central reservations in
Charleston, which handles all our North
American properties and supports our
international ones, has developed well with
total call volume up 29% for 2004 and
conversion at 27% versus an industry
average of 22%.
The new capacity at The Inn at Perry
Cabin (81 keys) is starting to generate a
return and EBITDA in 2004 was almost
30% up on the prior year. We are adding a
10
Windsor Court
La Samanna
Maroma Resort and Spa
dedicated spa facility as the finishing touch to
this property. Keswick Hall (48 keys) also
showed good progress with hotel EBITDA
up 100% over the prior year (albeit off a low
base) and strong interest in golf club
memberships and the surrounding real estate
lots. The new restaurant “Fossett’s” opened in
May 2004 and has been a great success with
restaurant revenue for July to December
2004 up 67% over 2003. This new restaurant
is also allowing us to take larger group
bookings as it has freed up the old restaurant
area for banqueting and meetings.
Owned Hotels: North America
EBITDA ($ millions)
Overall –
Same store
2004
2003
15.0
11.1
Average daily rate ($) 322
314
Rooms sold (’000)
142
131
RevPAR ($)
217
200
RevPAR ($)
216
200
RevPAR change
(in U.S.$)
+8%
RevPAR change
(in local currency)
+8%
Mexico
Property development
Maroma Resort and Spa (64 keys) goes from
strength to strength. 2004 RevPAR increased
30% over 2003 and EBITDA grew over 70%
up to $3.6 million. Margins also improved
substantially. The expanded restaurant
opened mid-2004 and the magnificent new
spa “Kinan” opened towards the end of the
year. The Riviera Maya is becoming ever more
popular as flights come in from all over the
U.S., especially Miami and New York. There is
huge demand for our best suites so we plan
to add eight super-luxury beachfront ones this
year and are also working on plans to develop
some villas for private ownership.
La Samanna (81 keys) on the island of St
Martin in the French West Indies had an
excellent 2004 with RevPAR, EBITDA and
margins all improving in spite of the weak
dollar which increased the hotel’s cost
structure (the hotel is in French territory
so costs are in euros).
Most importantly we attained all of the
necessary permits for our first major property
development project and broke ground a few
months ago. We will develop our land on the
Dutch side of the island in two phases with
the first, “Cupecoy Village” consisting of 169
condominiums, 60,000sq ft of mixed-use retail
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and a marina with seven mega-yacht berths.
This development will be spread over several
years and could generate about $50 million
cumulatively in profit on sale of condominiums
as well as an ongoing earning stream of about
$5 million per annum. It will use just over two
thirds of our land parcel on the Dutch side.
On the French side we have also broken
ground and are building 10 luxury cliff-front
villas. This project should be complete in the
next two years and generate profit on sale
of over $10 million. It uses only a small part
of our French-side land and we are already
working on designs for a further 20 villas
on other parcels. In addition to the profit
on sale, there will be ongoing earnings from
maintenance/service charges and revenue
from renting out the villas when not used by
the owners.
We look on property development as a
growing business for us as it fits well with our
company’s image and can make good use of
the land bank we have built up over the years.
In addition to our projects at La Samanna and
Keswick we are working to roll out our
development arm at Maroma,The Inn at Perry
Cabin and Bora Bora Lagoon Resort & Spa.
Above: Positioned on the Californian coast at
Santa Barbara, El Encanto Hotel & Garden Villas
has long been an exclusive retreat for Hollywood
celebrities and other guests in search of peace
and serenity. This elegant property comprises
clusters of cottages set in gardens planted with
rare trees. Orient-Express Hotels is working with
the National Trust for Historic Preservation to
restore the hotel, and to add five more cottages,
a spa and a fitness center.
ORIENT-EXPRESS HOTELS LTD.
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Hotels: Rest of the World
La Résidence Phou Vao
The Governor’s Residence
Napasai
Miraflores
Park Hotel
La Résidence d’ Angkor
Jimbaran Puri Bali
Bora Bora Lagoon Resort & Spa
Ubud Hanging Gardens
Hotel
Monasterio
Machu Picchu
Sanctuary Lodge
Orient-Express Safaris
Copacabana
Palace
Lilianfels Blue Mountains
The Westcliff
Mount Nelson Hotel
The Observatory Hotel
La Cabaña
2004 was a much better year as all the
properties bounced back from a tough 2003
that was affected by both the Iraq War and
SARS. Same store RevPAR increased 18%
in local currency (29% in dollars) and this
translated into much improved EBITDA (up
63%) and stronger margins. At the time of
writing, forward bookings are 17% ahead so
2005 should be another strong year.
South America
EBITDA at the Copacabana Palace (222 keys)
increased to $9.1 million from $6.6 million in
2003 mostly due to improved occupancy due
to growing demand from Europe (particularly
the U.K. and Germany). The start of 2005 has
Owned Hotels: Rest of the World
EBITDA ($ millions)
Overall –
Same store
2004
2003
18.0
11.1
Average daily rate ($) 247
228
Rooms sold (’000)
183
160
RevPAR ($)
136
107
RevPAR ($)
137
106
RevPAR change
(in U.S.$)
+29%
RevPAR change
(in local currency)
+18%
also been very strong and bookings are well
ahead for the rest of the year.
We have seen a similar pattern in Peru.
The Hotel Monasterio (126 keys) and Machu
Picchu Sanctuary Lodge (31 keys) combined
to generate EBITDA of $6.2 million for our
joint venture, up 63% over 2003. The
Miraflores Park Hotel (82 keys) in Lima also
performed well with RevPAR up 30% over
prior year but EBITDA did not greatly increase
as we closed the hotel for refurbishment in
the fourth quarter. This is now complete and
the hotel boasts refurbished rooms, additional
elevators, a larger pool and improved restaurant
and meeting facilities. As demand to Peru is
growing so quickly, it was clearly a good decision
to push ahead with these works last year.
Southern Africa
In South Africa our cost structure has been
affected by the strength of the rand versus
the dollar. In spite of this all of our businesses
in the region have done well. Both the Mount
Nelson Hotel (226 keys) in Cape Town and
The Westcliff (119 keys) in Johannesburg
showed marked improvement in profitability
in 2004. Among other improvements, we plan
to add a spa to each. Orient-Express Safaris
Left: Opening in mid-2005, Ubud Hanging
Gardens nestles on a dramatic hillside in the
heart of Bali close by the artists’ colony of Ubud.
A private funicular will take guests to its 38
individual villas, built in traditional local style,
each with its own plunge pool.
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Above: The new infinity swimming pool at Bora
Bora Lagoon Resort & Spa is the largest in the
lagoon, and enjoys spectacular views of Motu
Toopua, a fragment of an ancient volcano. Also
new for guests is the opportunity to combine a
stay with a six-night cruise aboard a 30-berth
yacht, visiting nearby islands.
(39 keys) generated EBITDA of $0.2 million in
2004 after suffering a $0.5 million loss in
2003. Bookings are well ahead (again) and
we are now offering an air service to the
camps from Johannesburg which should make
access much easier for our guests.
Australasia
All of our properties in Australasia showed
marked improvement as they recovered in
2004 from the downturn in 2003 (primarily
due to SARS). At The Observatory Hotel
(96 keys) occupancy recovered to 69% from
56% in 2003 and EBITDA increased by
almost 70%.
At Lilianfels (85 keys) in the Blue
Mountains we finished our refurbishment,
adding an outdoor pool and a spa. In the
second half of the year the hotel returned
immediately to pre-2000 operating levels
and bookings are well ahead for 2005.
Bora Bora Lagoon Resort & Spa
(79 keys) was a major problem in 2003
generating $1.2 million loss at the EBITDA
level. The results have turned around in 2004
with RevPAR up over 50% generating
EBITDA of $0.5 million for the year. 2005
looks like another year of improvement but
longer term we still face challenges as several
new hotels are under construction in the area.
Asia
Our Asian hotel collection is the Pansea group
of six properties and our investment during
February 2004 looks to have been very well
timed as demand has picked up reflecting the
recovery of tourism to Southeast Asia.
At Jimbaran Puri (41 keys) in Bali,
occupancy grew back to 71% in 2004 versus
only 47% in 2003. As a result, revenue and
EBITDA both increased to more than 2.5
times the prior year level. In Bali we have under
construction Ubud Hanging Gardens (38 keys)
that will open mid-2005.This beautiful property
is located in the mountains and each room
has a private pool. Ubud has always been a
popular destination and should be the perfect
complement to our existing beachfront hotel.
The Napasai (55 keys) on Koh Samui,
Thailand opened during 2004 so it is early days
to judge performance. Fortunately Koh Samui
island is on the east side of Thailand so it was
unaffected by the tsunami or its aftermath.
La Résidence d’Angkor (55 keys) in
Siem Reap, La Résidence Phou Vao (34 keys)
in Luang Prabang, and The Governor’s
Residence (49 keys) in Yangon have all seen
substantial gains and Pansea’s total EBITDA
has more than doubled over 2003. Our
agreement with Pansea includes a convertible
loan and the right to buy the company at a
future date so we are very encouraged to see
the business grow so well.
Restaurants
Our largest investment in stand-alone restaurants
is at ‘21’ Club in New York. 2004 was a much
stronger year with revenue up 14% and EBITDA
$1.2 million ahead of the prior year. The
business climate seems more positive as we
enter 2005 and we are getting more demand
from the investment banking sector that has
always been a mainstay for the restaurant.
Our other restaurant investments are
much smaller. At La Cabaña in Buenos Aires
2004 was the first full year of operations and
the restaurant made a small loss but demand
is steadily growing month on month so 2005
should show improvement. Harry’s Bar our
joint venture private dining club in London
continues to do well.
ORIENT-EXPRESS HOTELS LTD.
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Royal Scotsman
British Pullman
Northern Belle
Venice Simplon-Orient-Express
Afloat in France
Road to Mandalay
Eastern & Oriental Express
PeruRail
Trains and Cruises
Our trains and cruises recovered the ground
lost in 2003 (due to the Iraq war and SARS)
and much more. All of the European trains
had an outstanding year and bookings are
encouraging for 2005.
EBITDA for our flagship train, the Venice
Simplon-Orient-Express, was $4.3 million,
more than $2 million ahead of 2003. Most of
the demand growth came from the U.K., France
and Germany. The U.S. and Japan are still
below historic levels so there is clear potential
for us to generate more business from these
markets. The new Budapest route introduced
in 2004 was particularly well received.
Our Pullman train offers day trips out
from London. Bookings poured in and
EBITDA increased to $2.2 million versus less
than $1 million in the prior year. Even more
pleasing was our more recently launched
Northern Belle train that primarily serves
the northern U.K. markets. EBITDA was
14
$1.8 million ($0.3 million in 2003) so we
are generating an excellent return on our
$9 million total investment.
The Road To Mandalay river cruiser and
the Eastern & Oriental Express also bounced
back albeit less strongly. 2005 bookings look
solid although we did suffer some cancelations
following the tsunami last December as some
guests combine these trips with holidays at
beach resorts that were affected.
Our earnings from PeruRail increased
dramatically (up almost $3 million) helped by
Below: The Hiram Bingham luxury rail service,
operated by PeruRail between Cuzco and Machu
Picchu, has proved so popular that it has increased
its service to run six times a week. The train, which
has two dining cars and an open-air observation
car, departs from and returns to Cuzco later in the
day than other services, allowing guests to explore
the sanctuary as the sun goes down.
Trains and Cruises EBITDA ($ millions)
2004
2003
Owned European train operations
8.3
3.5
PeruRail
6.4
3.5
Road To Mandalay
0
0.4
Central costs and other
(1.7)
(1.4)
Total
13.0
6.0
the success of our new luxury Hiram Bingham
rail service that operates between Cuzco and
Machu Picchu. Peru is becoming a very
popular destination and we have had to invest
in additional rolling stock and an extra
locomotive to cope with demand.
Based on the strength of these businesses
we have invested in two other cruise and train
operations during 2004. The first is Afloat in
France, which has five luxury canal boats that
operate in Burgundy and Provence. Each
boat takes between six and 12 guests and
several have their own pools. There is an
excellent fit with our customer profile and
plenty of scope for expansion. We acquired
50% of the business for $3 million and will
buy the remaining 50% at a price equivalent
to seven times EBITDA in a few years time.
We also agreed to acquire The Royal
Scotsman luxury train which runs five to 10
day itineraries around Scotland and the north
of England. The deal was structured in a
similar way to acquire 50% of the business
upfront and then the residual at a multiple
(in this case about six times) a few years
later. This is attractive to us as it allows us
to build the business and helps assure that
we have not overpaid.
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The magic of the Scottish Highlands surrounds
guests aboard The Royal Scotsman, as it travels
through wild countryside and along virgin stretches
of coast.The train stops at castles, whiskey
distilleries and other places of interest along the
way, where guests enjoy special tours in the
company of local experts – or even the laird of
a private estate.
Outlook for 2005
I look back with some satisfaction at the
Outlook section of last year’s annual report.
It was clear at that time we were likely to see
a recovery with much stronger demand “from
the second quarter onwards”. As we
expected, results have picked up particularly
towards the end of the year and 2004 fourth
quarter RevPAR was up 12% in local currency
(18% in dollars).
What we could not foresee was the
success we would have in finding exciting new
acquisitions to add to our portfolio. The
Grand Hotel Europe is a very positive
addition as it is a large investment at six times
EBITDA so it instantly adds to the bottom
line. Our ability to locate and complete this
sort of deal is a major strength of the
company.
Another real positive is the speed with
which we have attained the required permits
for our first major property development,
the villas and condominiums at La Samanna.
I expect property developments around the
world to become a major generator of profit
for the company in the years to come.
We look forward to 2005 with high
expectations. At the time of writing business is
going well, bookings are 7% ahead of last year
and we have the added upside from the
forthcoming opening of the Caruso hotel in
Italy and profits from our recent acquisitions
elsewhere.
Simon M. C. Sherwood
President
ORIENT-EXPRESS HOTELS LTD.
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Chief Financial Officer’s report
EBITDA in 2004 was up 22% to $79 million
from $64.9 million (excluding the gain on
sale of a hotel in 2003). Depreciation
increased by $3.1 million primarily due to
acquisitions, capital expenditure and partly
the weaker dollar.
We continue to enjoy the benefit of a
low effective tax rate (16% in 2004) due in
large part to the company being incorporated
in Bermuda so the flow-through from
EBITDA to bottom line earnings is particularly
efficient. Net earnings for the year increased
by 46% from $19.4 million in 2003 (excluding
the gain on sale of a hotel) to $28.2 million.
Cash flow from operations improved 60%
from $33 million to $53 million.
All owned hotels
Overall –
Same store
2004
2003
Average daily rate ($) 366
340
Rooms sold (’000)
433
430
RevPAR ($)
214
184
RevPAR ($)
213
184
RevPAR change
(in U.S.$)
16%
RevPAR change
(in local currency)
8%
During the year, the company invested
$35 million in acquisitions, which included
the purchase of El Encanto in Santa Barbara
($26 million) and an investment in Afloat in
France ($3 million). A further $65 million was
spent on capital expenditure to existing
properties (including approximately $15
million of maintenance capital expenditure).
The major works during the year were the
continued renovation of the Hotel Caruso,
the addition of rooms and new facilities at
Maroma Resort and Spa, a new spa at the
Cipriani, completion of the refurbishment
of Bora Bora Lagoon Resort & Spa and
the addition of new rooms and improved
facilities at La Residencia.
To fund this program, the company drew
down debt of $110 million versus principal
repayments of $55 million. After paying
dividends of $3 million, net cash flow for
the year was a surplus of $5 million, resulting
in a cash balance of $86 million at 31
December, 2004.
Total debt at year end was $584 million
of which $303 million was in euros, $218
million in U.S. dollars and the balance in other
currencies. All the debt is senior secured
mortgage finance. We find that the unique
properties we have in our portfolio are
attractive security to the banks allowing them
Above: Keswick Hall at Charlottesville,Virginia,
has opened “Fossett’s”, a new 70-seat restaurant
named for Thomas Jefferson’s cook at his nearby
home of Monticello.This is a dining room with
a view: floor-to-ceiling windows provide a
spectacular panorama of the recently upgraded
Arnold Palmer championship golf course and
the countryside beyond.
Left: Maroma Resort and Spa on the Mexican
Riviera has recently added a new, dedicated spa
“Kinan” that offers a number of specialized
Mexican treatments.
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to offer us very competitive rates and terms.
Our average cost of debt was 4.1% at
December 31, 2004.
The company has been very active so far
in 2005. On February 8 we added the
Grand Hotel Europe in St Petersburg to our
collection of hotels. This will result in a total
investment of around $125 million once our
program of refurbishment and investment is
complete. $65 million of finance has been
provided by a syndicate of banks led by the
International Finance Corporation, a subsidiary
of the World Bank, which has extensive
lending experience in Russia.
We have also made much progress with
our property development on St Martin and
have obtained attractive finance. The terms of
this financing is such that the company will
provide its equity participation by way of the
land and not cash. The loan will be repaid as
stage payments are received from the
purchasers of condominiums and villas with a
proportion of these proceeds going to the
bank and the balance to the company. This
should further enhance the cash flow return
of the project.
With all of this activity in the last 12
months (particularly the Grand Hotel Europe)
and other acquisitions and investments that
we have under consideration, we decided to
raise additional funds through the sale of
equity. In March 2005 the company sold
5.05 million shares at $25.54 per share.
Sea Containers (our largest shareholder) also
took the opportunity to sell 4.5 million shares
reducing its shareholding from 42% down to
25%. This has helped alleviate any perceived
overhang related to its position and has also
greatly increased the company’s free float
(excluding Sea Containers’ shareholding) from
20 million shares to 30 million shares.
James G. Struthers
Vice President – Finance and Chief Financial
Officer
ORIENT-EXPRESS HOTELS LTD.
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A selection of awards received in 2004
Hotel Cipriani
The Inn at Perry Cabin
• Gold List Condé Nast Traveler (U.S.)
• 6th Best City Hotel in Europe
Departures magazine (U.S.)
• Best Hotel in Venice
Andrew Harper’s Hideaway Report (U.S.)
• 5th Best European Hotel Condé Nast Traveller (U.K.)
• Included in the 500 Ultimate Guide – The
Greatest Hotels in The World Travel & Leisure (U.S.)
• Gold List Condé Nast Traveler (U.S.)
• 18th Best U.S. Resort Hideaway
Andrew Harper’s Hideaway Report (U.S.)
Keswick Hall
Villa San Michele
• Gold List Condé Nast Traveler (U.S.)
• 11th Best International Resort Hideaway
Andrew Harper’s Hideaway Report (U.S.)
• 25th Best European Hotel Condé Nast Traveller (U.K.)
Hotel Splendido
• Gold List Condé Nast Traveler (U.S.)
• 6th Best International Resort Hotel
Andrew Harper’s Hideaway Report (U.S.)
• 7th Best European Hotel Condé Nast Traveller (U.K.)
Hôtel de la Cité
• 500 Ultimate Guide – The Greatest Hotels in
The World Travel & Leisure (U.S.)
• Gold List Condé Nast Traveler (U.S.)
• Retained one Michelin Star for the third
consecutive year Michelin Guide
• Gold List Condé Nast Traveler (U.S.)
• 23rd Best Boutique Hotel in U.S.A. & Canada
Departures magazine (U.S.)
Charleston Place
• Gold List Condé Nast Traveler (U.S.)
• 4th Top U.S. and Canada Destination
Travel and Leisure (U.S.)
• Gold Key Award 2004 for Excellence in
Hospitality Design (U.S.)
• Top City Hotel Spa in the U.S.A. and Canada –
The Spa at Charleston Place Travel & Leisure (U.S.)
• One of the top 100 travel experiences in the
world – highest score ever in the 17-year history
of the award Condé Nast Traveler (U.S.)
• Preferred Hotel Partner
Diners Club Magazine (Germany)
Maroma Resort and Spa
Lapa Palace
• Top Restaurant in Lisbon – Ristorante Hotel
Cipriani Zagat Guide (U.S.)
• Gold List Condé Nast Traveler (U.S.)
• Top Hotel in Lisbon
Andrew Harper’s Hideaway Report (U.S.)
• 18th Best European Hotel Condé Nast Traveller (U.K.)
Reid’s Palace
• Gold List Condé Nast Traveler (U.S.)
• Gold List Condé Nast Traveler (U.S.)
• Mexico’s Leading Spa Resort
World Travel Awards
• 3rd Best Central American Hotel
Condé Nast Traveler (U.S.)
La Samanna
• Included in the 500 Ultimate Guide to the
Greatest Hotels in The World Travel & Leisure (U.S.)
• Top Hotel in the Atlantic & Caribbean
Departures magazine (U.S.)
Hotel Ritz, Madrid
• Gold List Condé Nast Traveler (U.S.)
• 16th Best City Hotel in Europe
Departures magazine (U.S.)
• Best Hotel in Madrid Global Finance (U.S.)
• Top Hotel in Madrid
Andrew Harper’s Hideaway Report (U.S.)
• Spain’s Leading Hotel World Travel Awards
La Residencia
• 11th Best Beach Hotel in Europe
Departures magazine (U.S.)
Copacabana Palace
• Gold List Condé Nast Traveler (U.S.)
• 4th Best Hotel in Mexico, Central and South
America Departures magazine (U.S.)
• South America’s Leading hotel
World Travel Awards
• 18th Best Overseas Leisure Hotel – Americas
and Caribbean Condé Nast Traveler (U.S.)
• 7th Best South American Hotel
Condé Nast Traveller (U.K.)
Hotel Monasterio
Windsor Court Hotel
• 17th Best City Hotel in the U.S.A. & Canada
Departures magazine (U.S.)
• 8th Best Hotel in the U.S.A. and Canada
Travel and Leisure (U.S.)
• Top Hotel in New Orleans
Andrew Harper’s Hideaway Report (U.S.)
18
• Gold List Condé Nast Traveler (U.S.)
• 82nd Best Hotel in the World
Condé Nast Traveller (U.K.)
• 4th Best Hotel in South America
Condé Nast Traveller (U.K.)
• Peru’s Leading Hotel World Travel Awards
Above: The Maru Spa at Bora Bora Lagoon Resort
offers guests a unique experience – traditional
Polynesian treatments high above the ground in the
branches of a massive banyan tree. This lofty
treehouse spa is complemented by other treatment
rooms on the beachfront and beside the lagoon –
all encircled by lush tropical gardens.
Miraflores Park Hotel
• One of the World’s Best Business Hotels
Travel & Leisure (U.S.)
• 6th Best South American Hotel
Condé Nast Traveller (U.K.)
Bora Bora Lagoon Resort & Spa
• Gold List (scored 100% for location)
Condé Nast Traveler Gold (U.S.)
• 9th Best Spa in Australia and the South Pacific –
Maru Spa Condé Nast Traveller (U.K.)
• 9th Best Hotel in Australia, New Zealand & South
Pacific Departures magazine (U.S.)
• 6th Best Australasia and South Pacific Leisure
Hotel Condé Nast Traveller (U.K.)
• Maru Spa named as the “New Spa to Watch”
Travel & Leisure (U.S.)
Mount Nelson Hotel
• Included in the 500 Ultimate Guide of the
Greatest Hotels in The World Travel & Leisure (U.S.)
• Gold List Condé Nast Traveler (U.S.)
• 12th Best Overseas Leisure Hotel in Africa,
Indian Ocean and Maldives Condé Nast
Traveller (U.K.)
• Africa’s Leading Hotel World Travel Awards
The Westcliff
• Gold List Condé Nast Traveler (U.S.)
48818_p8_19.rev2
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Financial review
Contents
Khwai River Lodge
• Gold List Condé Nast Traveler (U.S.)
• 12th best safari camp Condé Nast Traveller (U.K.)
Report of independent registered
public accounting firm
21
Savute Elephant Camp
Consolidated balance sheets
22
Statements of consolidated operations
23
Statements of consolidated cash flows
24
Statements of consolidated
shareholders’ equity
25
Notes to consolidated financial
statements
26
Summary of quarterly earnings
40
Five-year performance
41
Price range of common shares
41
Summary of earnings by operating
unit and region
42
Summary of operating information
for owned hotels
43
Corporate governance
43
Shareholder and investor information
44
• 2nd Best Safari Camp in Botswana
Travel & Leisure (U.S.)
Le Manoir aux Quat’Saisons
• Best British Hotel Condé Nast Traveler (U.S.)
• Gold List Condé Nast Traveler (U.S.)
• 2nd Best Country Hotel in Europe
Departures magazine (U.S.)
• Gold Ribbon RAC (U.S.)
• 3rd Best U.K. Leisure Hotel Condé Nast
Traveller (U.K.)
• Retained two Michelin Stars for the 20th
consecutive year Michelin Guide
The Observatory Hotel
• Gold List Condé Nast Traveler (U.S.)
• Best Five Star Accommodation Hotel &
Accommodation Management magazine (Australia)
• Best Overall Accommodation Property in Australia
Hotel & Accommodation Management magazine
(Australia)
• Deluxe Hotel of the Year Australian Hotel Awards
• 20th Best Australasia and South Pacific Overseas
Leisure Hotel Condé Nast Traveller (U.K.)
• 11th Best Pacific Rim Hotel Condé Nast
Traveler (U.S.)
• Australasia’s Leading Hotel World Travel Awards
Lilianfels Blue Mountains Resort & Spa
• Best Boutique Hotel Hotel & Accommodation
Management magazine (Australia)
• Best Regional Property Hotel & Accommodation
Management magazine (Australia)
• Best Restaurant – Darley’s Australian Hotel Awards
• 14th Best Overseas Leisure Hotel Australasia and
South Pacific Condé Nast Traveller (U.K.)
• 14th Best Hotel in the Pacific Rim
Condé Nast Traveler (U.S.)
Corporate
• Gold E Award of Excellence – James B.
Sherwood Entrée (U.S.)
• Best Travel & Leisure Title – Orient-Express
Magazine APA Media Awards (U.K.)
• James B. Sherwood awarded Hotel Design Award
(U.K.)
• National Order of the Southern Cross –
James B. Sherwood Government of Brazil
ORIENT-EXPRESS HOTELS LTD.
19
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This report contains, in addition to historical information, forwardlooking statements that involve risks and uncertainties. These include
statements regarding earnings growth, investment plans and similar
matters that are not historical facts. These statements are based on
management’s current expectations and are subject to a number of
uncertainties and risks that could cause actual results to differ
materially from those described in the forward-looking statements.
Factors that may cause a difference include, but are not limited to,
those mentioned in the report, unknown effects on the travel and
leisure markets of terrorist activity and any police or military
response, varying customer demand and competitive considerations,
realization of bookings and reservations as actual revenue, inability to
sustain price increases or to reduce costs, fluctuations in interest
rates and currency values, uncertainty of negotiating and completing
proposed capital expenditures and acquisitions, adequate sources of
capital and acceptability of finance terms, possible loss or amendment
of planning permits and delays in construction schedules for
expansion projects, shifting patterns of tourism and business travel
and seasonality of demand, adverse local weather conditions,
changing global and regional economic conditions, and legislative,
regulatory and political developments. Further information regarding
these and other factors is included in the filings by the company and
Sea Containers Ltd. with the U.S. Securities and Exchange Commission.
20
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Report of Independent Registered Public Accounting Firm
Board of Directors and Shareholders
Orient-Express Hotels Ltd.
Hamilton, Bermuda
March 3, 2005
We have audited the accompanying consolidated balance sheets of
Orient-Express Hotels Ltd. and subsidiaries (the “Company”) as of
December 31, 2004 and 2003, and the related consolidated statements
of operations, shareholders’ equity, and cash flows for each of the three
years in the period ended December 31, 2004. The consolidated
financial statements are the responsibility of the Company’s
management. Our responsibility is to express an opinion on these
consolidated financial statements based on our audits.
We conducted our audits in accordance with the standards of the
Public Company Accounting Oversight Board (United States). Those
standards require that we plan and perform the audit to obtain
reasonable assurance about whether the consolidated financial
statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and
disclosures in the consolidated financial statements. An audit also
includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, such consolidated financial statements present fairly, in
all material respects, the financial position of Orient-Express Hotels Ltd.
and subsidiaries as of December 31, 2004 and 2003, and the results of
their operations and their cash flows for each of the three
years in the period ended December 31, 2004, in conformity with
accounting principles generally accepted in the United States of America.
We have also audited, in accordance with the standards of the
Public Company Accounting Oversight Board (United States), the
effectiveness of the Company’s internal control over financial reporting
as of December 31, 2004, based on the criteria established in Internal
Control – Integrated Framework issued by the Committee of
Sponsoring Organizations of the Treadway Commission and our report
(not presented herein) dated March 3, 2005 expressed an unqualified
opinion on management’s assessment of the effectiveness of the
Company’s internal control over financial reporting and an unqualified
opinion on the effectiveness of the Company’s internal control over
financial reporting.
Deloitte & Touche LLP
New York, New York
ORIENT-EXPRESS HOTELS LTD.
21
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Consolidated Balance Sheets
December 31,
Assets
Cash and cash equivalents
Accounts receivable, net of allowances of $1,027 and $976
Due from related parties
Prepaid expenses and other
Inventories
Total current assets
Property, plant and equipment, net of accumulated depreciation of $155,582 and $127,772
Investments
Goodwill
Other assets
Liabilities and Shareholders’ Equity
Working capital facilities
Accounts payable
Due to related parties
Accrued liabilities
Deferred revenue
Current portion of long-term debt and capital leases
Total current liabilities
Long-term debt and obligations under capital leases
Deferred income taxes
Minority interest
Shareholders’ equity:
Preferred shares $0.01 par value (30,000,000 shares authorized, issued nil)
class A common shares $0.01 par value (120,000,000 shares authorized):
Issued – 31,790,601
class B common shares $0.01 par value (120,000,000 shares authorized):
Issued – 20,503,877
Additional paid-in capital
Retained earnings
Accumulated other comprehensive loss
Less: reduction due to class B common shares owned by a subsidiary – 18,044,478
Total shareholders’ equity
Commitments and contingencies
See notes to consolidated financial statements.
22
2004
$000
2003
$000
85,610
34,984
14,718
11,914
28,965
176,191
81,347
28,060
10,737
11,717
26,115
157,976
916,811
123,599
29,529
19,461
1,265,591
822,257
146,495
29,529
12,969
1,169,226
42,920
23,839
5,453
37,288
20,493
46,245
176,238
19,165
18,830
4,924
40,409
12,617
51,271
147,216
537,461
2,710
716, 409
4,192
502,917
2,846
652,979
3,803
–
–
318
318
205
280,212
277,281
(12,845)
(181)
544,990
–
1,265,591
205
278,821
252,484
(19,203)
(181)
512,444
–
1,169,226
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Statements of Consolidated Operations
2004
$000
2003
$000
2002
$000
Revenue
357,284
315,863
279,268
Expenses:
Depreciation and amortization
Operating
Selling, general and administrative
Total expenses
28,349
175,547
114,474
318,370
25,265
158,577
101,761
285,603
19,546
136,198
86,063
241,807
–
4,250
–
38,914
34,510
37,461
(19,948)
2,723
(17,225)
(19,892)
2,673
(17,219)
(19,771)
1,420
(18,351)
21,689
17,291
19,110
2,551
1,002
2,287
19,138
16,289
16,823
9,084
7,320
8,471
28,222
$
23,609
$
25,294
$
Earnings per class A and B common share:
Basic and diluted
0.82
0.76
0.82
Dividends per class A and class B common share
0.10
–
–
Year ended December 31,
Gain on sale of hotel asset
Earnings from operations before net finance costs
Interest expense, net
Interest and related income
Net finance costs
Earnings before income taxes
Provision for income taxes
Earnings before earnings from unconsolidated companies
Earnings from unconsolidated companies net of tax
Net earnings on class A and B common shares
See notes to consolidated financial statements.
ORIENT-EXPRESS HOTELS LTD.
23
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Statements of Consolidated Cash Flows
Year ended December 31,
Cash flows from operating activities:
Net earnings
Adjustment to reconcile net earnings to net cash
provided by operating activities:
Depreciation and amortization
Undistributed earnings of affiliates
Other non cash items
Gain from sale of hotel asset
Change in assets and liabilities, net of effects
from acquisition of subsidiaries:
(Increase)/decrease in accounts receivable, prepaid expenses and other
Increase in inventories
Increase/(decrease) in accounts payable, accrued liabilities, deferred
revenue and other liabilities
Total adjustments
Net cash provided by operating activities
2004
$000
2003
$000
2002
$000
28,222
$ 23,609
25,294
28,349
(3,588)
(1,054)
–
25,265
(2,275)
(234)
(4,250)
19,546
(2,142)
2,919
–
(9,220)
(1,208)
1,445
(1,172)
320
(2,699)
11,064
24,343
52,565
(9,144)
9,635
33,244
(7,919)
10,025
35,319
(65,104)
(38,479)
3,003
–
(100,580)
(54,450)
(27,225)
1,504
39,604
(40,567)
(56,857)
(62,094)
–
–
(118,951)
Cash flows from financing activities:
Net proceeds from/(repayments of) working capital
facilities and redrawable loans
Issuance of common shares (net)
Proceeds from long-term debt
Principal payments under long-term debt
Payment of common share dividends
Net cash provided by financing activities
21,336
–
88,226
(55,053)
(3,425)
51,084
(7,715)
51,893
68,236
(64,080)
–
48,334
15,036
–
84,134
(35,879)
–
63,291
Effect of exchange rate changes on cash
Net increase/(decrease) in cash and cash equivalents
Cash and cash equivalents at beginning of year
Cash and cash equivalents at end of year
1,194
4,263
81,347
85,610
2,476
43,487
37,860
81,347
338
(20,003)
57,863
37,860
Cash flows from investing activities:
Capital expenditures
Acquisitions and investments, net of cash acquired
Proceeds from sale of fixed assets and other
Proceeds from sale of hotel asset
Net cash used in investing activities
See notes to consolidated financial statements.
24
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Statements of Consolidated Shareholders’ Equity
class A
class B
Preferred
Common
Common
Shares
Shares
Shares
Additional
At Par
At Par
At Par
Paid-in
Retained
Value
Value
Value
Capital
Earnings
Loss
Subsidiary
Income
$000
$000
$000
$000
$000
$000
$000
$000
–
283
205
226,963
203,581
Balance, January 1, 2002
Accumulated
Comprehensive income:
Net earnings on common shares
for the year
Other comprehensive income
Balance, December 31, 2002
(38,264)
Total
Shares
Held By A
Comprehensive
(181)
25,294
8,601
33,895
8,601
–
283
205
35
226,963
228,875
(29,663)
(181)
51,858
23,609
23,609
10,460
34,069
10,460
–
318
205
278,821
252,484
(19,203)
(181)
1,391
Stock based compensation
Dividends on common shares
Comprehensive income:
Net earnings on common shares
for the year
Other comprehensive income
Balance, December 31, 2004
Comprehensive
Common
25,294
Issuance of class A common shares
in public offering, net of issuance costs
Comprehensive income:
Net earnings on common shares
for the year
Other comprehensive income
Balance, December 31, 2003
Other
(3,425)
28,222
28,222
6,358
34,580
6,358
–
318
205
280,212
277,281
(12,845)
(181)
See notes to consolidated financial statements.
ORIENT-EXPRESS HOTELS LTD.
25
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Notes to Consolidated Financial Statements
1. Summary of significant accounting policies and basis of
presentation
(a) Business
In this report Orient-Express Hotels Ltd. is referred to as the
“Company”, and the Company and its subsidiaries are referred to
collectively as “OEH”. At December 31, 2004, Sea Containers Ltd., a
Bermuda company (“SCL”), owned 42% of the equity shares in the
Company.
At December 31, 2004, OEH owned or invested in 37 de luxe hotels
and resorts located in the United States, Caribbean, Europe, southern
Africa, South America, Southeast Asia, Australia and South Pacific, three
restaurants in London, New York and Buenos Aires, six tourist trains in
Europe, Southeast Asia and Peru, and a river cruiseship in Burma and
five canal boats in France. See Note 17 regarding the purchase of an
additional hotel in February 2005.
(b) Basis of presentation
The accompanying consolidated financial statements reflect the results
of operations, financial position and cash flows of the Company and all
its majority-owned subsidiaries. The consolidated financial statements
have been prepared using the historical basis in the assets and liabilities
and the historical results of operations directly attributable to OEH,
and all intercompany accounts and transactions between the Company
and its subsidiaries have been eliminated. Unconsolidated companies
that are 20% to 50% owned are accounted for on an equity basis.
Cash and cash equivalents include all cash balances and highly-liquid
investments having original maturities of three months or less.
The consolidated financial statements include an allocation of certain
general corporate administrative expenses from SCL which are provided
under a shared services agreement with SCL. In the opinion of
management, general corporate administrative expenses have been
allocated to OEH on a reasonable and consistent basis using
management's estimate of services provided by SCL. However, such
allocations are not necessarily indicative of the level of expenses which
might have been incurred had OEH not been operating under a shared
services agreement during the periods presented. Therefore, the financial
information included herein may not necessarily reflect the consolidated
results of operations, financial position and cash flows of OEH had
OEH been a separate stand alone entity for the years presented.
Certain items in 2003 and 2002 have been reclassified to conform to
the current year's presentation.
“FASB” means Financial Accounting Standards Board and “APB”
means Accounting Principles Board, the FASB’s predecessor. “SFAS”
means Statement of Financial Accounting Standards of the FASB, and
“FIN” means an accounting interpretation of the FASB.
(c) Foreign currency translation
The functional currency for each of the Company’s foreign subsidiaries
is the applicable local currency. Foreign subsidiary income and
expenses are translated into U.S. dollars, the reporting currency of the
Company, at the average rates of exchange prevailing during the year.
The assets and liabilities are translated into U.S. dollars at the rates of
exchange on the balance sheet date and the related translation
adjustments are included in accumulated other comprehensive
income/(loss). No income taxes are provided on the translation
26
adjustments as management does not expect that such gains or losses
will be realized. Foreign currency transaction gains and losses are
recognized in operations as they occur.
(d) Estimates
The preparation of financial statements in conformity with accounting
principles generally accepted in the United States of America requires
management to make estimates and assumptions that affect the
reported amounts of assets and liabilities and the disclosure of
contingent assets and liabilities at the date of the financial statements
and the reported amounts of revenues and expenses during the
reporting period. Estimates include, among others, the allowance for
doubtful accounts, depreciation and amortization, carrying value of
assets including intangible assets, employee benefits, taxes and
contingencies. Actual results may differ from those estimates.
(e) Stock-based compensation
SFAS No. 123, “Accounting for Stock Based Compensation”, as
amended by SFAS No. 148, “Accounting for Stock-Based
Compensation – Transition and Disclosure – An Amendment of FASB
Statement No. 123”, encourages but does not require companies to
record compensation cost for stock based employee compensation
plans at fair value. The Company has chosen to account for stock
based compensation using the intrinsic value method prescribed in APB
Opinion No. 25, “Accounting for Stock Issued to Employees”, as
amended, and related interpretations.
(f) Revenue recognition
Hotel and restaurant revenues are recognized when the rooms are
occupied and the services are performed. Tourist train and cruise
revenues are recognized upon commencement of the journey.
Deferred revenue consisting of deposits paid in advance is recognized
as revenue when the services are performed for hotels and restaurants
and upon commencement of tourist train and cruise journeys.
Revenues under management contracts are recognized based upon the
attainment of certain financial results, primarily revenue and operating
earnings, in each contract as defined.
(g) Earnings from unconsolidated companies
Earnings from unconsolidated companies include OEH’s share of the
net earnings of its equity investments as well as interest income related
to loans and advances to the equity investees amounting to $8,165,000
in 2004 (2003 – $7,080,000, 2002 – $7,892,000).
(h) Marketing costs
Marketing costs are expensed as incurred and are reported in selling,
general and administrative expenses. Marketing costs include costs of
advertising and other marketing activities. These costs were
$26,780,000 in 2004 (2003 – $24,783,000, 2002 – $20,091,000).
(i) Interest expense, net
OEH capitalizes interest during the construction of assets. Interest
expense, net excludes interest which has been capitalized in the
amount of $1,708,000 in 2004 (2003 – $1,795,000, 2002 –
$1,271,000).
(j) Interest and related income
Interest and related income consists entirely of foreign currency
exchange transaction gains of $2,723,000 in 2004 (2003 – $2,673,000,
2002 – $1,420,000).
(k) Income taxes
Deferred income taxes result from temporary differences between the
financial reporting and tax bases of assets and liabilities. Deferred taxes
are recorded at enacted statutory rates and are adjusted as enacted
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rates change. Classification of deferred tax assets and liabilities
corresponds with the classification of the underlying assets and liabilities
giving rise to the temporary differences or the period of expected
reversal, as applicable. A valuation allowance is established, when
necessary, to reduce deferred tax assets to the amount that is more
likely than not to be realized based on available evidence.
(l) Earnings per share
Basic earnings per share exclude dilution and are computed by dividing
net earnings available to common shareholders by the weighted
average number of class A and B common shares outstanding for the
period. The number of shares used in computing basic earnings per
share was 34,250,000 for the year ended December 31, 2004 (2003 –
31,139,000, 2002 – 30,800,000). The number of shares used in
computing diluted earnings per share was 34,367,000 for the year
ended December 31, 2004 (2003 – 31,152,000, 2002 – 30,858,000).
The following table is a reconciliation of the net earnings and per
share amounts used in the calculation of basic earnings per share and
diluted earnings per share:
Net
Earnings
$000”
Number
of Shares
’000
Per Share
Amount
$
Year ended December 31, 2004:
Basic earnings per share
Effect of dilutive stock options
Diluted earnings per share
28,222
–
28,222
34,250
117
34,367
0.82
–
0.82
Year ended December 31, 2003:
Basic earnings per share
Effect of dilutive stock options
Diluted earnings per share
23,609
–
23,609
31,139
13
31,152
0.76
–
0.76
Year ended December 31, 2002:
Basic earnings per share
Effect of dilutive stock options
Diluted earnings per share
25,294
–
25,294
30,800
58
30,858
0.82
–
0.82
(m) Inventories
Inventories include food, beverages, certain operating stocks and retail
goods. Inventories are valued at the lower of cost or market value
under the first-in, first-out method.
(n) Property, plant and equipment, net
Property, plant and equipment, net are stated at cost less accumulated
depreciation. The cost of significant renewals and betterments is
capitalized and depreciated, while expenditures for normal maintenance
and repairs are expensed as incurred.
Depreciation expense is computed using the straight-line method over
the following estimated useful lives:
Description
Useful lives
Buildings
Up to 60 years and 10% residual value
Tourist trains
Up to 50 years
Furniture, fixtures and equipment
5-25 years
River cruiseship and canal boats
25 years
Equipment under capital lease and
leasehold improvements
Lesser of initial lease term or
economic life
(o) Impairment of long-lived assets
In accordance with SFAS No. 144, “Accounting for the Impairment or
Disposal of Long-Lived Assets”, OEH management reviews long-lived
assets whenever events or changes in circumstances indicate that the
carrying amount of the assets may not be recoverable. In the event
that an impairment occurs, OEH records a charge to income calculated
as the excess of the asset's carrying value over the estimated fair value.
(p) Investments
Investments include equity interests in and advances to unconsolidated
companies.
(q) Goodwill
In accordance with SFAS No. 142, “Goodwill and Other Intangible
Assets”, goodwill must be evaluated annually to determine impairment.
Goodwill is not amortized.
The goodwill impairment testing under SFAS No. 142 is performed in
two steps, first, the determination of impairment based upon the fair
value of a reporting unit as compared with its carrying value and,
second, if there is an impairment, the measurement of the amount of
impairment loss by comparing the implied fair value of goodwill with
the carrying amount of that goodwill. Impairment testing is performed
annually at year end. At December 31, 2004, there was no impairment.
(r) Concentration of credit risk
Due to the nature of the leisure industry, concentration of credit risk
with respect to trade receivables is limited. OEH’s customer base is
comprised of numerous customers across different geographic areas.
(s) Derivative financial instruments
If the derivative is designated as a fair value hedge, the changes in the
fair value of the derivative and of the hedged item attributable to the
hedged risk are recognized in earnings. If the derivative is designated as
a cash flow hedge, the effective portions of changes in the fair value of
the derivative are recorded as a component of accumulated other
comprehensive income/(loss) in shareholders’ equity and are
recognized in the statement of consolidated operations when the
hedged item affects earnings. The ineffective portion of a hedging
derivative’s change in the fair value will be immediately recognized in
earnings. If the derivative is not designated as a hedge for accounting
purposes, the change in its fair value is recorded in earnings.
OEH management formally documents all relationships between
hedging instruments and hedged items, as well as its risk management
objectives and strategies for undertaking various hedge transactions.
OEH links all hedges that are designated as fair value hedges to specific
assets or liabilities on the balance sheet or to specific firm
commitments. OEH links all hedges that are designated as cash flow
hedges to forecasted transactions or to floating rate liabilities on the
balance sheet. OEH management also assesses, both at the inception
of the hedge and on an ongoing basis, whether the derivatives that are
used in hedging transactions are highly effective in offsetting changes in
fair values or cash flows of hedged items. Should it be determined that
a derivative is not highly effective as a hedge, OEH will discontinue
hedge accounting prospectively.
OEH is exposed to interest rate risk on its floating rate debt and
management tries to manage the impact of interest rate changes on
earnings and cash flows. OEH’s policy is to enter into interest rate
swap and interest rate cap agreements from time to time to hedge the
variability in interest rate cash flows due to interest rate risk on floating
rate debt. These swaps convert the floating rate interest payments on
a portion of the outstanding debt into fixed payments.
ORIENT-EXPRESS HOTELS LTD.
27
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(t) Recent accounting pronouncements
In December 2004, the FASB issued SFAS No 123R, “Share-Based
Payment”, requiring employee stock options and rights to purchase
shares under stock participation plans to be accounted for under
the fair value method, and eliminates the ability to account for these
instruments under the intrinsic value method prescribed by APB
Opinion No. 25 and allowed under the original provisions of SFAS
No. 123. SFAS No. 123R requires the use of an option pricing model
for estimating fair value, which is amortized to expense over the
service periods. The requirements of SFAS No. 123R are effective for
fiscal periods beginning after June 15, 2005. SFAS No. 123R allows for
either prospective recognition of compensation expense or
retrospective recognition, which may be back to the original issuance
of SFAS No. 123 or only to interim periods in the year of adoption.
The Company is currently evaluating these transition methods and
the impact of its adoption.
28
2. Significant acquisitions and investments
(a) Acquisitions
2004 Acquisitions:
Effective November 1, 2004, OEH acquired El Encanto Hotel and
Garden Villas in Santa Barbara, California for $26,000,000 paid in cash.
Part of the purchase price was financed with a bank loan. The entire
purchase price was allocated to tangible fixed assets, primarily land,
based on their fair value.
Also in November 2004, OEH entered into an agreement to acquire
The Royal Scotsman luxury tourist train. OEH expects to purchase
50% ownership of The Royal Scotsman in April 2005 and the balance
will be acquired on an earn-out basis at a multiple of 5.5 times EBITDA
(as defined in the purchase agreement) in three years. The initial 50%
is being acquired for approximately $2,700,000 (including assumption
of 50% of debt) and the balance will depend on earnings.
On May 25, 2004, OEH acquired a 50% interest in a luxury French
canal and river cruise business called Afloat in France. Also as part of
this transaction OEH acquired the five canal boats operated in the
business. The total investment was $3,000,000 paid in cash.
On February 2, 2004, OEH entered into an agreement with the
Pansea Hotel group, the owner of six de luxe hotels in Southeast Asia.
Under this agreement, OEH is to provide a maximum of $8,000,000
in loans to the hotel holding company which are convertible after
three years into approximately 25% of the holding company’s shares.
As of December 31, 2004, OEH had provided $4,625,000 in loans to
Pansea which are recorded in other assets. The conversion price of
the loans is determined at a multiple of EBITDA less existing debt
on the exercise date (as defined in the investment agreement).
OEH is not managing the hotels but is marketing them along with
its other properties.
2003 Acquisitions:
In April 2003, OEH acquired a 50% interest in the Hotel Ritz in Madrid,
Spain, through a 50%/50% joint venture with a Spanish real estate
investment company. The purchase price of the hotel was
$135,000,000, and each joint venture partner contributed $22,000,000
with the balance financed by bank loans. In addition to its interest in
the hotel, OEH acquired the exclusive long-term management contract
of the hotel. This investment is accounted for under the equity method
of accounting.
2002 Acquisitions:
In February 2002, OEH acquired the hotel La Residencia in Mallorca,
Spain and the hotel Le Manoir aux Quat’Saisons in Oxfordshire,
England for approximately $40,000,000 in total. The price was paid
largely with bank mortgage finance.
In March 2002, OEH acquired for approximately $7,500,000 a 75%
share interest in Maroma Resort and Spa near Cancún, Mexico. The
purchase price was paid in cash, with $1,000,000 paid in March 2003.
(b) Dispositions
In November 2003, but effective at the beginning of the fourth quarter,
OEH sold the Hotel Quinta do Lago in the Algarve region of Portugal
at a price of $40,000,000 received in cash, which resulted in a gain of
approximately $4,250,000 (or $0.14 per share).
(c) Investments
Investments represent equity interests of 50% or less and in which
OEH exerts significant influence. OEH does not have effective control
of these unconsolidated companies and, therefore, accounts for these
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investments using the equity method.
OEH’s investments in and loans and advances to unconsolidated
companies amounted to $123,599,000 at December 31, 2004
(2003 – $146,495,000, 2002 – $85,159,000). OEH’s earnings
from unconsolidated companies were $9,084,000 in 2004 (2003 –
$7,320,000, 2002 – $8,471,000), and OEH received no dividends in
2004, 2003 or 2002 from these investments. See Note 16.
Summarized financial data for unconsolidated companies are as
follows:
December 31,
Current assets
Property, plant and equipment, net
Other assets
Total assets
2004
$000
39,993
357,949
5,469
403,411
2003
$000
42,172
279,298
4,472
325,942
Current liabilities
Long-term debt
Other liabilities
Total shareholders' equity
Total liabilities and shareholders' equity
41,290
216,251
79,403
66,467
403,411
43,538
144,251
71,351
66,802
325,942
Year ended December 31,
2004
$000
135,250
16,467
(4,767)
2003
$000
110,952
13,953
(1,282)
Revenue
Earnings from operations before net finance costs
Net loss
2002
$000
91,823
10,837
(3,002)
Included in unconsolidated companies is the Charleston Place Hotel to which OEH has made loans in addition to its equity investment. One of
these loans has a conversion feature exercisable by OEH no sooner than 2020 and in limited circumstances before then, under which OEH may
convert its loans into additional capital, thereby giving OEH a majority equity interest in the hotel.
Also included in unconsolidated companies are the Peru hotel and PeruRail joint ventures, under which OEH and the other 50% participant must
contribute equally additional equity capital needed for the businesses. If the other participant does not meet this obligation, OEH has the right to
dilute the other participant and obtain a majority equity interest in the affected joint venture company. OEH also has rights to purchase the other
participant's interests, exercisable in limited circumstances such as its bankruptcy.
3. Property, plant and equipment, net
The major classes of property, plant and equipment are as follows:
December 31,
Land and buildings
Machinery and equipment
Fixtures, fittings and office equipment
River cruiseship and canal boats
Less: accumulated depreciation
2004
$000
769,951
149,191
134,935
18,316
1,072,393
(155,582)
916,811
2003
$000
678,683
135,584
119,191
16,571
950,029
(127,772)
822,257
2004
$000
14,612
2,410
4,886
21,908
(2,591)
19,317
2003
$000
14,080
1,964
4,229
20,273
(1,626)
18,647
The major classes of assets under capital leases included above are as follows:
December 31,
Freehold and leased land and buildings
Machinery and equipment
Fixtures, fittings and office equipment
Less: accumulated depreciation
ORIENT-EXPRESS HOTELS LTD.
29
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4. Goodwill
5.Working capital facilities
As of December 31, 2004 and 2003, OEH determined the carrying
values of all its reporting units were less than their estimated fair
values, indicating that there was no impairment of the recorded
goodwill.
The Company’s goodwill consists of $700,000 related to the trains
and cruises business segment and $28,829,000 related to the hotels
and restaurants business segment. There was no change in the carrying
amount of goodwill for the year ended December 31, 2004.
Working capital facilities are comprised of the following, all repayable
within one year:
December 31,
Unsecured working capital facilities, with a
weighted average interest rate of 4.59% and
7.43%, respectively
2004
$000
2003
$000
42,920
19,165
OEH had approximately $55,000,000 of working capital lines of credit
at December 31, 2004 (2003 – $55,000,000) issued by various financial
institutions and having various expiration dates, of which $12,000,000
was undrawn (2003 – $35,835,000).
6. Long-term debt and obligations under capital leases
(a) Long-term debt
Long-term debt consists of the following:
December 31,
Loans from banks collateralized by property, plant and equipment payable
over periods of 1 to 11 years, with a weighted average interest
rate of 4.18% and 3.74%, respectively, primarily based on LIBOR
Loan secured by river cruiseship payable over 4 years, with a weighted
interest rate of 2.78% based on LIBOR
Obligations under capital lease (see Note 6(b))
Less: current portion
2004
$000
2003
$000
567,012
530,003
–
16,694
583,706
46,245
537,461
3,000
21,185
554,188
51,271
502,917
Certain credit agreements of OEH have restrictive covenants,
including a minimum consolidated net worth test and a minimum
consolidated interest coverage test as defined under a banksyndicated $179,000,000 loan facility borrowed during 2004 and
secured by three of OEH’s Italian hotels. At December 31, 2004,
OEH was in compliance with all of its restrictive covenants. OEH
does not currently have any covenants in any of its loan agreements
which limit the payment of dividends.
The following is a summary of the aggregate maturities of
consolidated long-term debt excluding obligations under capital leases
at December 31, 2004:
contingent obligations relating to the performance of its governmental
rail concessions. OEH has guaranteed, through 2005, $3,000,000 of
the debt obligations of Charleston Center LLC, owner of the Charleston
Place Hotel in which OEH has a 19.9% equity investment. OEH has
guaranteed, through 2005, a $3,000,000 bank loan to Eastern and
Oriental Express Ltd. in which OEH has a 25% equity investment. All
of these guarantees were in place before December 31, 2002.
(b) Obligations under capital leases
The following is a summary of future minimum lease payments under
capital leases together with the present value of the minimum lease
payments at December 31, 2004 :
Year ending December 31,
2005
2006
2007
2008
2010
2010 and thereafter
Year ending December 31,
2005
2006
2007
2008
2009
2010 and thereafter
Minimum lease payments
Less: amount of interest contained in above payments
Present value of minimum lease payments
Less: current portion
$000
43,329
134,446
103,303
208,887
44,503
32,544
567,012
The interest rates on substantially all of OEH's long-term debt are
adjusted regularly to reflect current market rates. Accordingly, the
carrying amounts of OEH’s long-term debt also approximate fair value.
OEH has guaranteed, through 2011, $12,184,000 of the debt obligations
of the PeruRail operations, an unconsolidated joint venture in which
OEH has a 50% investment and, through 2005, $4,413,000 of PeruRail
30
$000
3,692
2,620
2,376
2,308
2,129
6,993
20,118
3,424
16,694
2,916
13,778
The amount of interest deducted from minimum lease payments to
arrive at the present value is the interest contained in each of the leases.
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7. Pension plan
Through December 31, 2002, a number of non-U.S. OEH employees participated in a defined benefit pension plan of a subsidiary of SCL. As of
January 1, 2003, an OEH subsidiary established a new defined benefit plan and the OEH employees formerly included in the SCL plan transferred
to the new plan.
The significant weighted-average assumptions used to determine net periodic costs during the year are as follows:
Year ended December 31,
Discount rate
Assumed rates of compensation increases
Expected long-term rate of return on plan assets
2004
5.4%
3.0%
7.0%
2003
5.4%
3.0%
7.0%
2002
5.6%
2.6%
6.5%
The significant weighted-average assumptions used to determine benefit obligations at year end are as follows:
Year ended December 31,
Discount rate
Assumed rate of compensation increases
2004
5.30%
3.25%
2004
5.60%
3.00%
The discount rate essentially represents the rate of return on high-quality corporate bonds at the end of the year in the country in which the
assets are held.
In determining the expected long-term rate of return on assets, management has evaluated information from OEH’s actuaries and financial
advisors, including their review of anticipated future long-term performance of individual asset classes and the asset allocation strategy given the
anticipated requirements of the plan to determine the average rate of earnings expected on the funds invested. The returns projected are based
on broad equity and bond indices, including fixed interest rate U.K. gilts of long-term duration. OEH’s expected long-term rate of return is based
on an asset allocation of 61.2% in equity investments and 38.8% in fixed income investments.
The weighted-average asset allocations of OEH’s pension plan as of December 31, 2004 and 2003 by asset category as a percentage of plan
assets are as follows:
Year ended December 31,
Equity securities
Fixed income investments
Total
2004
61.2%
38.8%
100.0%
2003
60.4%
39.6%
100.0%
ORIENT-EXPRESS HOTELS LTD.
31
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7. Pension plan (continued)
The changes in the benefit obligation, the plan assets and the funded status for the plan were as follows:
Year ended December 31,
Change in benefit obligation:
Benefit obligation at beginning of year
Service cost
Interest cost
Plan participants’ contributions
Actuarial loss/(gain)
Benefits paid
Foreign currency translation
Benefit obligation at end of year
Change in plan assets:
Fair value of plan assets at beginning of year
Actual return on plan assets
Employer contributions
Plan participants' contributions
Transferred-in assets
Benefits paid
Foreign currency translation
Fair value of plan assets at end of year
Funded status
Unrecognized net actuarial loss
Net amount recognized
2004
$000
2003
$000
6,977
780
448
280
4,986
(329)
811
13,953
5,158
520
353
228
38
–
680
6,977
5,823
463
772
280
–
(329)
531
7,540
3,613
579
848
228
–
–
555
5,823
(6,413)
6,697
284
(1,154)
3,360
2,206
Included in actuarial loss/(gain) are amounts attributable to OEH employees as a result of individual OEH employee benefit obligations
transferred from the SCL defined benefit pension plan referred to above.
Amounts recognized in the consolidated balance sheets consist of the following:
Year ended December 31,
Prepaid benefit cost
Accrued benefit cost
Accumulated other comprehensive loss
Net amount recognized
2004
$000
284
–
–
284
2003
$000
362
(460)
2,304
2,206
At December 31, 2003, the accumulated benefit obligation was in excess of plan assets under the SCL defined benefit pension plan referred to
above. The following table details certain information with respect to OEH’s pension plan as follows:
Year ended December 31,
Project benefit obligation
Accumulated benefit obligation
Fair value of plan assets
32
2004
$000
13,953
7,359
7,540
2003
$000
6,057
5,218
4,758
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The components of net periodic benefit cost for the OEH employees covered under the plan consisted of the following:
Year ended December 31,
Service cost
Interest cost on projected benefit obligation
Expected return on assets
Net amortization and deferrals
Net periodic benefit cost
2004
$000
780
448
(362)
5
871
2003
$000
520
353
(274)
92
691
2004
$000
2003
$000
1,613
(159)
2002
$000
425
270
(264)
95
526
Additional information about OEH’s pension plan is as follows:
Year ended December 31,
Decrease/(increase) in minimum pension liability (net of tax) in other
comprehensive income
OEH expects to contribute $833,000 to its pension plan in 2005. At December 31, 2004, there were no members receiving benefits from the
plan. The following benefit payments, which reflect assumed future service, are expected to be paid:
$000
–
3
44
44
52
784
927
Year ending December 31,
2005
2006
2007
2008
2009
2010-2014
8. Income taxes
The provision for income taxes consists of the following:
United States
Other
Year ended December 31, 2004
Total
Deferred
Current
$000
$000
$000
848
538
310
1,703
(2,575)
4,278
2,551
(2,037)
4,588
Year ended December 31, 2003
Total
Deferred
Current
$000
$000
$000
(440)
(146)
(294)
1,442
(2,003)
3,445
1,002
(2,149)
3,151
Year ended December 31, 2002
Total
Deferred
Current
$000
$000
$000
1,981
1,204
777
306
(1,927)
2,233
2,287
(723)
3,010
The Company is incorporated in Bermuda, which does not impose an income tax. OEH’s effective tax rate is entirely due to income taxes
imposed by jurisdictions in which OEH conducts business other than Bermuda.
Deferred income taxes reflect the net tax effects of temporary differences between the carrying amount of assets and liabilities for financial
reporting purposes and the amounts used for income tax purposes. The following represents OEH’s net deferred tax liabilities:
December 31,
Gross deferred tax assets (operating loss carryforwards)
Less: valuation allowance
Net deferred tax assets
Deferred tax liabilities
Net deferred tax liabilities
2004
$000
64,493
(31,996)
32,497
(35,207)
(2,710)
ORIENT-EXPRESS HOTELS LTD.
2003
$000
71,467
(39,886)
31,581
(34,427)
(2,846)
33
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8. Income taxes (continued)
The deferred tax assets consist primarily of tax loss carryforwards. The gross amount of tax loss carryforwards is $196,299,000. Of this amount,
$59,168,000 will expire in the five years ending December 31, 2009, and a further $9,574,000 will expire in the five years ending December 31,
2014. The remaining losses of $127,557,000 will expire after December 31, 2014 or have no expiry date.
A valuation allowance has been provided against gross deferred tax assets where it is thought more likely than not that the benefits associated
with these assets will not be realized. The decrease in the valuation allowance from December 31, 2003 to December 31, 2004 of $7,890,000
reflects, among other things, the fact that management now believes that certain deferred tax assets in respect of the U.S. and Italian operations
are more likely than not to be realized.
The deferred tax liabilities consist primarily of differences between the tax basis of depreciable assets and the adjusted basis as reflected in the
financial statements.
OEH has prepared these financial statements pursuant to a tax sharing agreement with SCL and its subsidiaries. In accordance with that
agreement, prior to August 10, 2000, the date of the Company’s initial public offering, OEH utilized/relinquished losses with certain SCL
subsidiaries. After that date, OEH may no longer utilize/relinquish losses with SCL and its subsidiaries. The following represents the net liability that
exists from OEH to SCL and its subsidiaries:
Year ended December 31,
Tax sharing agreement
2004
$000
(92)
2003
$000
(1,973)
2002
$000
(1,973)
2004
$000
2003
$000
2002
$000
21,436
4,071
19,714
3,411
19,920
5,097
9. Supplemental cash flow information
Year ended December 31,
Cash paid for:
Interest
Income taxes
Non-cash investing and financing activities:
In conjunction with certain acquisitions in 2004, 2003 and 2002 (see Note 2(a)), liabilities were assumed as follows:
Year ended December 31,
Fair value of assets acquired
Cash paid
Liabilities assumed
2004
$000
30,146
(29,670)
476
2003
$000
50,611
(22,000)
28,611
2002
$000
73,166
(47,500)
25,666
10. Shareholders’ equity
(a) Public offering
In November and December 2003, the Company completed a
registered public offering in the United States through underwriters of
3,450,000 newly-issued class A common shares. Net proceeds
amounted to $51,893,000.
(b) Dual common share capitalization
The Company has been capitalized with class A common shares, of
which there are 120,000,000 authorized, and class B common shares, of
which there are 120,000,000 authorized, each convertible at any time
into one class A common share. In general, holders of class A and class
B common shares vote together as a single class, with holders of class B
shares having one vote per share and holders of class A shares having
one-tenth of one vote per share. In all other substantial respects, the
class A and class B common shares are the same.
(c) Shareholder rights agreement
The Company has in place a shareholder rights agreement which will
be implemented not earlier than the tenth day following the first to
34
occur of (i) the public announcement of the acquisition by a person
(other than a subsidiary of the Company, SCL or a subsidiary of SCL)
of shares carrying 20% or more of the total voting rights which may
be cast at any general meeting of the Company and (ii) the
commencement or announcement of a tender offer or exchange offer
by a person for shares carrying 30% or more of the total voting rights
that may be cast at any general meeting of the Company. At that time,
the rights will detach from the class A and class B common shares, and
the holders of the rights will be entitled to purchase, for each right
held, one one-hundredth of a series A junior participating preferred
share of the Company at an exercise price of $142 (the “Purchase
Price”) for each one one-hundredth of such junior preferred share,
subject to adjustment in certain events. From and after the date on
which any person acquires beneficial ownership of shares carrying 20%
or more of the total voting rights which may be cast at any general
meeting of the Company, each holder of a right (other than the
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acquiring person) will be entitled upon exercise to receive, at the then
current Purchase Price and in lieu of the junior preferred shares, that
number of class A or class B common shares (depending on whether
the right was previously attached to a class A or B share) having a
market value of twice the Purchase Price. If the Company is acquired
or 50% or more of its consolidated assets or earning power is sold,
each holder of a right will be entitled to receive, upon exercise at the
then current Purchase Price, that amount of common equity of the
acquiring company which at the time of such transaction would have a
market value of two times the Purchase Price. Also, the Company’s
board of directors may exchange all or some of the rights for class A
and class B common shares (depending on whether the right was
previously attached to a class A or B share) if any person acquires
20% beneficial ownership as described above, but less than 50%
beneficial ownership. The rights will expire on June 1, 2010 but may be
redeemed at a price of $0.05 per right at any time prior to the tenth
day following the date on which a person acquires beneficial ownership
of shares carrying 20% or more of the total voting rights which may be
cast at any general meeting of the Company.
(d) Acquired shares
Included in shareholders’ equity is a reduction for 18,044,478 class B
common shares of the Company that a subsidiary of the Company
acquired from SCL in July 2002 under an agreement with SCL dating
from July 2000. Consistent with the overall presentation of the capital
structure in the financial statements, the Company has given effect to
the terms and conditions of that agreement as if the agreement had
been consummated from the beginning of the earliest year presented.
As a result, a total of 18,044,478 class B common shares are deemed
to be owned by the Company subsidiary at December 31, 2004 and
2003. Under applicable Bermuda law, these shares are outstanding and
may be voted although in computing earnings per share these shares
are treated as a reduction to outstanding shares.
(e) Preferred shares
The Company has 30,000,000 authorized preferred shares, par value
$0.01 each, 500,000 of which have been reserved for issuance as series
A junior participating preferred shares upon exercise of preferred
share purchase rights held by class A and B common shareholders in
connection with the shareholder rights agreement. See Note 10(c).
11. Employee stock option plans
Under the Company’s 2000 and 2004 stock option plans, options to purchase up to 750,000 and 500,000, respectively, class A and B common shares may
be awarded to employees of OEH at fair market value at the date of grant. Options are exercisable three years after award and must be exercised ten
years from the date of grant. At December 31, 2004, 737,000 class A common shares were reserved under the 2000 plan for issuance pursuant to options
awarded to 47 persons, and 87,000 class A common shares were reserved under the 2004 plan for issuance pursuant to options awarded to 34 persons.
Transactions under the plans have been as follows:
Outstanding at beginning of period
Granted
Terminated
Exercised
Outstanding at end of period
Exercisable at end of period
Year ended December 31, 2004
Option price
Shares
676,000 $13.00-$19.00
$14.70
150,000
$13.40
(2,000)
–
824,000 $13.00-$19.00
271,500
Year ended December 31, 2003
Option price
Shares
573,000 $13.00-$19.00
103,000 $13.40-$17.09
–
–
676,000 $13.00-$19.00
$19.00
260,000
Year ended December 31, 2002
Option price
Shares
$19.00
546,500
301,500 $13.00-$13.06
$19.00
(275,000)
–
573,000 $13.00-$19.00
–
The options outstanding at December 31, 2004, were as follows:
Range of
Exercise Prices
$13.00
$13.06
$13.40
$14.70
$17.09
$19.00
$19.00
Number of Shares
Outstanding
Exercisable at
at 12/31/2004
12/31/2004
30,000
–
271,500
–
98,000
–
150,000
–
3,000
–
11,500
11,500
260,000
260,000
824,000
271,500
Remaining
Contractual Lives
7.8
7.8
8.4
9.6
8.8
6.2
5.6
Weighted Average of
Exercise Prices for
Outstanding Options
$13.00
$13.06
$13.40
$14.70
$17.09
$19.00
$19.00
Exercise Prices for
Exercisable Options
–
–
–
–
–
$19.00
$19.00
ORIENT-EXPRESS HOTELS LTD.
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11. Employee stock option plans (continued)
As discussed in Note 1(e), OEH accounts for its stock-based compensation plans under APB Opinion No. 25. Had compensation cost for the
Company's stock option plans been determined based on fair values as of the dates of grant, OEH’s net earnings and earnings per share would
have been reported as follows:
Year ended December 31,
Net earnings:
As reported on common shares
Add: Stock-based compensation expense included
in reported net income, net of related tax effects
Deduct:Total stock-based employee compensation expense
determined under fair value based method, net of related tax
Pro forma
Basic and diluted earnings per share:
As reported
Pro forma
2004
$000
2003
$000
2002
$000
28,222
23,609
25,294
1,514
–
–
(897)
28,839
$
0.82
0.80
(1,040)
22,569
$
0.76
0.72
(382)
24,912
$
0.82
0.81
The pro forma figures in the preceding table may not be representative of amounts in future years.
Estimates of fair values of stock options on the grant dates using the Black Scholes option pricing model are based on the following assumptions:
As of and for year ended December 31,
Expected share price volatility
Risk free interest rate
Expected annual dividends per share
Expected life of stock options
Weighted average fair value
2004
46.33%
4.01%
$0.10
5 years
$6.70
2003
51.68%
2.25%
None
5 years
$6.27
2002
40.34%
2.78%
None
5 years
$5.64
12. Commitments and contingencies
Outstanding contracts to purchase fixed assets were approximately $27,200,000 at December 31, 2004 (2003 – $11,200,000).
Future rental payments under operating leases in respect of equipment rentals and leased premises are payable as follows:
Year ending December 31,
2005
2006
2007
2008
2009
2010 and thereafter
$000
922
507
257
194
159
155
2,194
Rental expense for the year ended December 31, 2004 amounted to $1,716,000 (2003 – $1,366,000, 2002 – $1,108,000).
Under the agreement to acquire The Royal Scotsman (see Note 2(a)), OEH has an option exercisable in April 2005 to purchase 50% of the
outstanding shares of the train-owning company at a multiple of EBITDA less existing debt (as defined in the agreement). OEH also has an option
exercisable in December 2007 to acquire the remaining 50% of the outstanding shares at a multiple of EBITDA less existing debt (as defined in the
agreement). In the event that OEH does not exercise these options, the existing shareholders have the option to sell the related shares to OEH
for £1,400,000 ($2,700,000) and £2,100,000 ($4,000,000), respectively. At December 31, 2004, the fair value of this contract was approximately zero.
Pursuant to the terms of its investment in the Afloat in France business (see Note 2(a)), OEH purchased an option to acquire the remaining
shares in the business, which is exercisable effective in May 9, 2009. Prior to that date, the other shareholders have the right to sell their shares in
the business to OEH. Both options have the same exercise prices, which are determined at a multiple of EBITDA less existing debt (as defined in
the agreement) during the exercise periods. The exercise price of each option approximates the fair value of the shares at December 31, 2004.
Pursuant to the terms of its investment in the Pansea Hotel group (see Note 2(a)), OEH paid $1,400,000, which is recorded in other assets, for
options exercisable after three to five years to acquire all of the holding company’s shares. The existing shareholders also have the right to sell
their shares to OEH after five years. These options have the same exercise prices, which are determined at a multiple of EBITDA less existing debt
(as defined in the agreement) during the exercise periods. The exercise price of the options approximates the fair value of the shares at
December 31, 2004.
36
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13. Derivative financial instruments
OEH is exposed to interest rate risk on its floating rate debt and has entered into interest rate cap agreements that limit such exposure to a
certain level. These agreements have been designated and have qualified as cash flow hedges of the benchmark interest rate risk related to the
floating rate debt. Considering that the cap agreements have the same profile as the respective hedged debt instruments, they are expected to be
and have been highly effective and, therefore, no ineffectiveness has been recognized in earnings and no component of the derivative instruments
was excluded from the assessment of hedge effectiveness.
At December 31, 2004 and 2003, the fair values of the outstanding interest rate caps were accounted for as other assets at $124,000 and
$524,000, respectively.
The amounts in accumulated other comprehensive income, a $209,000 loss at December 31, 2004, will be recognized in earnings in the periods
during which the hedged forecasted transactions affect earnings (i.e., when the hedged interest expense on the debt is recorded). Of the existing
losses at December 31, 2004, approximately $210,000 will be reclassified into earnings during the next 12 months, assuming no further changes in
fair value of the contracts. No hedges were discontinued during 2004 and OEH does not hold derivatives other than for hedging purposes.
In December 2003, OEH entered into an interest rate swap to hedge its exposure to interest rate movements in a loan for a notional amount of
a9,466,700 ($12,900,000). The fair value of the swap was $630,000 negative and $142,800 negative at December 31, 2004 and 2003, respectively,
and recorded in accrued liabilities. Changes in the fair value of this swap are recorded to interest expense as OEH elected not to apply hedge
accounting for this transaction.
14. Other comprehensive income/(loss)
The accumulated balances for each component of other comprehensive loss are as follows:
Year ended December 31,
Foreign currency translation adjustments
Derivative financial instruments
Minimum pension liability, net of tax
2004
$000
(12,636)
(209)
–
(12,845)
2003
$000
(17,682)
92
(1,613)
(19,203)
2004
$000
28,222
5,046
(301)
–
1,613
34,580
2003
$000
23,609
10,465
102
–
(107)
34,069
The components of other comprehensive income/(loss) are as follows:
Year ended December 31,
Net earnings on common shares
Foreign currency translation adjustments
Change in fair value of derivatives
Reclassification adjustment for losses included in net earnings
Additional minimum pension liability, net of tax
Comprehensive income
ORIENT-EXPRESS HOTELS LTD.
2002
$000
25,294
8,361
(10)
1,756
(1,506)
33,895
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15. Information concerning financial reporting for segments and operations in different geographical areas
OEH’s segment information has been prepared in accordance with SFAS No. 131, “Disclosures about Segments of an Enterprise and Related
Information”. OEH’s operations are organized along service lines as two segments, (i) hotels and restaurants and (ii) tourist trains and cruises, and
are grouped into various geographical regions. Hotels at December 31, 2004 are located in the United States, Caribbean, Mexico, Europe,
Southern Africa, South America, Southeast Asia, Australia and South Pacific, restaurants are located in London, New York and Buenos Aires, tourist
trains operate in Europe, Southeast Asia and Peru, and a river cruiseship operates in Burma and five canal boats in France. Segment performance
is evaluated based upon segment net earnings before interest, tax (including tax on earnings from unconsolidated companies), depreciation,
amortization and gain on hotel asset sale (“segment EBITDA”). Segment information is presented in accordance with the accounting policies
described in Note 1.
Financial information regarding these business segments is as follows:
Year ended December 31,
Revenue:
Hotels and restaurants
Owned hotels – Europe
– North America
– Rest of World
Hotel management/part ownership interests
Restaurants
Tourist trains and cruises
Depreciation and amortization:
Hotels and restaurants
Owned hotels – Europe
– North America
– Rest of World
Restaurants
Tourist trains and cruises
Segment EBITDA:
Owned hotels – Europe
– North America
– Rest of World
Hotel management/part ownership interests
Restaurants
Tourist trains and cruises
Central overheads
Segment EBITDA/net earnings reconciliation:
Segment EBITDA
Add:
Gain on sale of hotel asset
Less
Depreciation and amortization
Net finance costs
Provision for income taxes
Share of provision for income taxes of unconsolidated companies
Net earnings
38
2004
$000
2003
$000
2002
$000
116,074
75,376
79,576
7,344
20,339
298,709
58,575
357,284
115,884
66,564
62,989
6,495
17,510
269,442
46,421
315,863
99,939
58,801
54,725
5,104
18,240
236,809
42,459
279,268
9,954
6,536
7,755
757
25,002
3,347
28,349
8,420
6,249
6,888
595
22,152
3,113
25,265
6,543
4,433
5,481
512
16,969
2,577
19,546
29,868
14,951
18,051
14,885
3,911
13,057
(15,707)
79,016
32,789
11,097
11,077
13,474
2,616
5,984
(12,157)
64,880
29,170
11,149
12,696
12,408
3,779
8,348
(10,509)
67,041
79,016
64,880
67,041
–
4,250
–
28,349
17,225
2,551
2,669
28,222
25,265
17,219
1,002
2,035
23,609
19,546
18,351
2,287
1,563
25,294
48818_p20_44.qxd.rev2
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Year ended December 31,
Earnings from unconsolidated companies:
Hotels and restaurants
Hotel management/part ownership interests
Restaurants
Tourist trains and cruises
Capital expenditure:
Hotels and restaurants
Owned hotels – Europe
– North America
– Rest of World
Restaurants
Tourist trains and cruises
Identifiable assets:
Hotels and restaurants
Owned hotels – Europe
– North America
– Rest of World
Hotel management/part ownership interests
Restaurants
Tourist trains and cruises
2004
$000
2003
$000
2002
$000
6,437
223
6,660
2,424
9,084
6,979
85
7,064
256
7,320
7,310
(125)
7,185
1,286
8,471
32,643
14,177
15,214
694
62,728
2,376
65,104
16,827
19,928
13,213
801
50,769
3,681
54,450
415,791
296,704
307,155
103,184
43,024
1,165,858
99,733
1,265,591
411,818
230,956
316,532
81,159
37,543
1,078,008
91,218
1,169,226
16,712
23,601
12,350
2,313
54,976
1,881
56,857
Financial information regarding geographic areas based on the location of properties is as follows:
Year ended December 31,
Revenue:
Europe
North America
Rest of World
Long-lived assets at book value:
Europe
North America
Rest of World
2004
$000
2003
$000
2002
$000
169,788
98,244
89,252
357,284
157,632
87,341
70,890
315,863
137,179
80,873
61,216
279,268
431,663
331,544
306,732
1,069,939
412,246
276,070
309,965
998,281
2004
$000
916,811
123,599
29,529
1,069,939
2003
$000
822,257
146,495
29,529
998,281
Long-lived assets at book value constitute the following:
Property, plant and equipment
Investments
Goodwill
ORIENT-EXPRESS HOTELS LTD.
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16. Related party transactions
For the year ended December 31, 2004, OEH paid subsidiaries of SCL
$5,330,000 (2003 – $4,631,000, 2002 – $5,899,000) for the provision
of various services provided under a shared services agreement
between OEH and SCL. These amounts have been settled in
accordance with the shared services agreement and are included in
selling, general and administrative expenses.
OEH manages under a long-term contract the Charleston Place
Hotel (accounted for under the equity method) and has made loans to
the hotel-owning company. For the year ended December 31, 2004,
OEH earned $3,943,000 (2003 – $3,917,000, 2002 – $4,087,000) in
management fees which are recorded in revenue, and $8,165,000
(2003 – $7,080,000, 2002 – $7,892,000) in interest income on
partnership and other loans, which is recorded in earnings from
unconsolidated companies. These loans have an indefinite maturity
period and bear interest at a spread over LIBOR.
OEH manages under long-term contracts the Hotel Monasterio and
the Machu Picchu Sanctuary Lodge owned by its 50%/50% joint venture
with local Peruvian interests, as well as the 50%-owned PeruRail
operation, and provides loans, guarantees and other credit accommodation
to these joint ventures. In the year ended December 31, 2004, OEH
earned management and guarantee fees of $4,337,000 (2003 –
$1,940,000, 2002 – $1,167,000), and loan interest of $104,000 (2003 –
$297,000, 2002 – $330,000) which is recorded in earnings form
unconsolidated companies. At December 31, 2004, loans to the hotels
aggregated $2,000,000, bear interest at a spread over LIBOR and come
due in 2005. At the same date, OEH had a $750,000 subordinated loan
to the PeruRail operation with an indefinite maturity date and interest
also at a spread over LIBOR. All of the guarantees relating to the
Company’s investments in Peru were in place prior to December 31, 2002.
OEH manages under a long-term contract the Hotel Ritz in Madrid,
Spain, in which OEH acquired a 50% interest in April 2003 (see Note
2) and is accounted for under the equity method. For the year ended
December 31, 2004, OEH earned $969,000 (2003 – $1,069,000) in
management fees, which are included in revenue.
OEH has granted to James Sherwood, Chairman and a director of
the Company, a right of first refusal to purchase the Hotel Cipriani in
Venice, Italy in the event OEH proposes to sell it. The purchase price
would be the offered sale price in the case of a cash sale or the fair
market value of the hotel, as determined by an independent valuer, in
the case of a non-cash sale. Mr. Sherwood has also been granted an
option to purchase the hotel at fair market value if a change in control
of the Company occurs.
17. Subsequent events (unaudited)
On February 10, 2005, OEH announced that it had acquired a 93.5%
interest in, and full management and operational control of, the 301room Grand Hotel Europe in St Petersburg, Russia. The total
investment in this property over three years is expected to
approximate $125,000,0000, including the total purchase price and
subsequent refurbishment. Financing for the investment, in the amount
of $65,000,000, was provided by the International Finance Corporation
and a syndicate of banks.
On February 25, 2005, the Company filed a registration statement
with the SEC for the public offering in the United States through
underwriters of 4,000,000 newly-issued class A common shares of the
Company. Net proceeds from the offering are estimated at
$94,800,000 which OEH intends to use primarily for its general
corporate purposes which may include funding capital expenditure at
existing OEH properties, or purchase of additional properties, funding
OEH’s working capital needs, or reducing OEH debt.
Summary of quarterly earnings (unaudited)
Quarter ended
December 31
$000
2004
Revenue
Earnings/(losses) before net finance costs
Net finance costs
Earnings/(losses) before income taxes
Provision for/(benefit from) income taxes
Earnings from unconsolidated companies net of tax
Net earnings/(losses) on class A and B common shares
Net earnings/(losses) per class A and B common share: basic and diluted
Dividends per class A and B common share
40
92,889
9,511
(2,618)
6,893
(1,316)
213
8,422
$
0.25
0.025
September 30
$000
100,025
15,807
(4,751)
11,056
2,504
2,943
11,495
$
0.34
0.025
June 30
$000
100,536
16,529
(4,876)
11,653
2,375
3,633
12,911
$
0.38
0.025
March 31
$000
63,834
(2,933)
(4,980)
(7,913)
(1,012)
2,295
(4,606)
$
(0.13)
0.025
48818_p20_44.qxd.rev2
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Summary of quarterly earnings (unaudited) continued
December 31
$000
2003
Revenue
Gain on sale of hotel asset
Earnings before net finance costs
Net finance costs
Earnings/(losses) before income taxes
Provision for/(benefit from) income taxes
Earnings from unconsolidated companies net of tax
Net earnings/(losses) on class A and B common shares
77,708
4,250
8,818
(2,919)
5,899
(1,530)
1,189
8,618
Quarter ended
September 30
June 30
$000
$000
88,492
–
11,697
(4,600)
7,097
1,308
2,391
8,180
March 31
$000
60,409
–
721
(4,971)
(4,250)
(600)
1,042
(2,608)
89,254
–
13,274
(4,729)
8,545
1,824
2,698
9,419
$
0.27
$
0.27
$
0.31
2003
$000
315,863
2002
$000
279,268
2001
$000
252,236
2000
$000
267,459
–
–
–
Net earnings/(losses) per class A and B common share: basic and diluted
$
(0.08)
Five-year performance
2004
$000
357,284
Year ended December 31,
Revenue
Gain on sale of hotel asset
4,250*
–
Earnings from unconsolidated companies – net of tax
9,084
7,320
8,471
7,415
8,536
Net earnings on class A and class B common shares
28,222
$
23,609
$
25,294
$
29,850
$
39,965
$
0.82
$000
1,265,591
0.76
$000
1,169,226
0.82
$000
998,532
0.97
$000
836,251
1.43
$000
725,876
Long-term obligations
583,706
554,188
459,016
362,871
276,773
Shareholders’ equity
544,990
$
0.10
512,444
$
–
426,482
$
–
392,587
$
–
378,717
$
–
Net earnings per class A and class B common share
Basic and diluted
Total assets
Dividends per class A and class B common share
*The gain in 2003 related to the sale of the Hotel Quinta do Lago in Portugal.
Price range of common shares and dividends (unaudited)
The class A common shares of the Company are traded on the New York Stock Exchange under the symbol OEH.The class B common shares of
the Company are closely held and not listed. The following table presents the quarterly high and low sales prices of class A common shares in
2004 and 2003 as reported for New York Stock Exchange composite transactions:
2004
First quarter
Second quarter
Third quarter
Fourth quarter
High
$
19.79
18.23
17.04
23.05
2003
Low
$
16.35
14.50
14.50
15.71
High
$
13.50
14.81
17.20
17.70
Low
$
8.50
9.35
13.89
15.55
The Company paid no cash dividends on its class A and B common shares in 2003, and paid quarterly cash dividends at the rate of $0.025 per
class A and B common share in 2004.
ORIENT-EXPRESS HOTELS LTD.
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Summary of earnings by operating unit and region (unaudited)
The revenue and segment net earnings before interest, tax (including tax on earnings from unconsolidated companies), depreciation, amortization
and gain on hotel asset sale (“segment EBITDA”) for the years ended 2004, 2003 and 2002 are analyzed as follows:
Year ended December 31,
2004
$m
2003
$m
2002
$m
Revenue and earnings
from unconsolidated companies:
Owned hotels – Europe
– North America
– Rest of the World
Hotel management interests
Restaurants
Tourist trains and cruises
Gain on sale of Quinta do Lago
Total
116.1
75.4
79.6
14.9
20.5
62.5
–
369.0
115.9
66.6
63.0
13.5
17.6
48.7
4.2
329.5
99.9
58.8
54.8
12.4
18.1
45.3
–
289.3
Segment EBITDA:
Owned hotels – Europe
– North America
– Rest of the world
Hotel management interests
Restaurants
Tourist trains and cruises
Central overheads
Total segment EBITDA
29.9
15.0
18.0
14.9
3.9
13.0
(15.7)
79.0
32.8
11.1
11.1
13.5
2.6
6.0
(12.2)
64.9
29.2
11.1
12.7
12.4
3.8
8.3
(10.5)
67.0
2004
$m
28.2
2003
$m
23.7
2002
$m
25.2
28.4
17.2
2.6
2.6
25.3
17.2
1.0
2.0
19.5
18.4
2.3
1.6
–
79.0
(4.3)
64.9
–
67.0
The foregoing segment EBITDA reconciles to net earnings as follows:
Year ended December 31,
Segment net earnings
Add:
Depreciation and amortization
Net finance costs
Provision for income taxes
Share of provision for income taxes of unconsolidated companies
Less:
Gain on sale of hotel
Segment EBITDA
Management evaluates the operating performance of the Company’s segments on the basis of segment EBITDA and believes that segment
EBITDA is a useful measure of operating performance because segment EBITDA is not affected by non-operating factors such as leverage and the
historic cost of assets. EBITDA is a financial measure commonly used in the Company's industry. Our segment EBITDA, however, may not be
comparable in all instances to EBITDA as disclosed by other companies.
Segment EBITDA should not be considered as an alternative to earnings from operations or net earnings (as determined in accordance with
U.S. generally accepted accounting principles) as a measure of the Company’s operating performance, or as an alternative to net cash provided by
operating, investing and financing activities (as determined in accordance with U.S. generally accepted accounting principles) as a measure of our
ability to meet cash needs.
42
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Summary of operating information for owned hotels (unaudited)
Average Daily Rate ($)
Year ended December 31,
Europe
North America
Rest of World
Worldwide
2004
626
322
247
366
2003
493
314
228
340
Rooms Sold (’000)
Year ended December 31,
Europe
North America
Rest of World
Worldwide
2004
108
142
183
433
2003
139
131
160
430
RevPAR ($)
Year ended December 31,
Europe
North America
Rest of World
Worldwide
2004
342
217
136
214
2003
280
200
107
184
Comparable/Same Store RevPAR ($)
Year ended December 31,
Europe
North America
Rest of World
Worldwide
2004
346
216
137
213
2003
307
200
106
184
$
13
8
29
16
Change %
Local
Currency
2
8
18
8
Corporate governance
The Board of Directors of the Company has established corporate governance measures substantially in compliance with requirements of the
New York Stock Exchange (“NYSE”). These include a set of Corporate Governance Guidelines, Charters for each of the Audit Committee,
Compensation Committee, and Nominating and Governance Committee of the full Board, and a Code of Business Conduct for Directors, Officers
and Employees. The Board of Directors has also adopted a Code of Business Practices for the Company's Principal Executive, Financial and
Accounting Officers. These documents are published on the Company’s website (www.orient-express.com) or may be obtained by writing to the
Company’s Secretary at its registered office address (Orient-Express Hotels Ltd., 22 Victoria Street, P.O. Box HM 1179, Hamilton HM EX, Bermuda).
Because the Company is a foreign private issuer as defined in rules of the U.S. Securities and Exchange Commission, it is not required to comply
with all NYSE corporate governance requirements as they apply to U.S. domestic companies listed on the NYSE. The Company’s corporate
governance measures differ in two significant ways. First, the Charter of the Company’s Nominating and Governance Committee generally
mandates the same responsibilities as NYSE rules require but authorizes the Committee to act only upon the Board’s request and in an advisory
capacity. Second, the Charter of the Company’s Compensation Committee authorizes the Committee to recommend to the Board the
compensation of the Company's chief executive officers but does not empower the Committee itself to determine, approve or modify that
compensation.
ORIENT-EXPRESS HOTELS LTD.
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Shareholder and investor information
Correspondence
Orient-Express Services Ltd.
20 Upper Ground
London SE1 9PF
England
Tel: +44 (0)20 7805 5060
Fax: +44 (0)20 7805 5908
(delete first 0 if dialling from outside the U.K.)
Website
http://www.orient-express.com
Stock exchange listing
Orient-Express Hotels Ltd. class A common shares are listed on the
New York Stock Exchange under the trading symbol OEH.
Share transfer agent and registrar
EquiServe Trust Company N.A
P.O. Box 43010
Providence, Rhode Island 02940-3010
Tel: +1 (781) 575-3170
Website: http://www.equiserve.com
Shareholders are encouraged to contact the Transfer Agent
directly regarding any change in certificate registration,
change of mailing address, lost or stolen certificates, consolidation
of multiple accounts, elimination of duplicate mailings and
related shareholder service matters. Shareholders may also
access their accounts and other information directly through
EquiServe’s website.
Co-registrar of shares
The Bank of Bermuda
6 Front Street
Hamilton HM 11
Bermuda
Independent registered public accounting firm
Deloitte & Touche LLP
Two World Financial Center
New York, New York 10281
Annual general meeting
The annual general meeting of shareholders will be held at the
registered office of the company at 22 Victoria Street, Hamilton,
Bermuda, on June 6, 2005, at 2:00pm.
Shareholder information
Copies of SEC Form 10-K annual reports, SEC Form 10-Q quarterly
reports and other published financial information are available on the
company’s website or may be obtained upon request to:
Orient-Express Hotels Inc.
1114 Avenue of the Americas
New York, New York 10036
Tel: +1 (212) 302-5055
Fax: +1 (212) 302-5073
Investor relations
Shareholders, securities analysts, portfolio managers and representatives
of financial institutions seeking financial information may contact:
James Struthers
Chief Financial Officer
Orient-Express Hotels Ltd.
c/o Orient-Express Services Ltd.
20 Upper Ground
London SE1 9PF
Tel: +44 (0)20 7805 5223
Fax: +44 (0)20 7805 5010
Email: james.struthers@orient-express.com
(delete first 0 if dialling from outside the U.K.)
William W. Galvin III
The Galvin Partnership
136 Maple Avenue
P.O. Box 1248
Greenwich, Connecticut 06830
Tel: +1 (203) 618-9800
Fax: +1 (203) 618-1010
Email: wwg@galvinpartners.com
Media seeking information should contact:
Pippa Isbell
Vice President – Public Relations
Orient-Express Hotels Ltd.
c/o Orient-Express Services Ltd.
20 Upper Ground
London SE1 9PF
Tel: +44 (0)20 7805 5065
Fax: +44 (0)20 7805 5938
Email: pippa.isbell@orient-express.com
(delete first 0 if dialling from outside the U.K.)
44
Produced by The Illustrated London News Group. Printed in the United Kingdom by GreenShires Group Ltd.
Registered office
Orient-Express Hotels Ltd.
22 Victoria Street
P.O. Box HM 1179
Hamilton HM EX
Bermuda
Tel: +1 (441) 295-2244
Fax: +1 (441) 292-8666
COVERS.rev
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3:35 pm
Page 2
Reservation information
Afloat in France
Burgundy and Languedoc, France
U.K. telephone: +44 20 7960 0500
Fax: +44 20 7805 5908
U.S. telephone: +1 401 351 7518
Fax: +1 401 351 7220
Bora Bora Lagoon Resort & Spa
Tahiti, French Polynesia
Telephone: +689 60 40 00
Fax: +689 60 40 03
British Pullman
South of England
U.K. telephone: +44 20 7960 0500
Fax: +44 20 7805 5908
U.S. telephone: +1 401 351 7518
Fax: +1 401 351 7220
Copacabana Palace
Rio de Janeiro, Brazil
Telephone: +55 21 2548 7070
Fax: +55 21 2235 7330
La Résidence Phou Vao
Luang Prabang, Laos
Telephone: +856 71 21 2194
Fax: +856 71 21 2534
The Governor’s Residence
Yangon, Myanmar
Telephone: +951 229 860
Fax: +95 1 228 260
Eastern & Oriental Express
Southeast Asia
U.K. telephone: +44 20 7960 0500
Fax: +44 20 7805 5908
U.S. telephone: +1 401 351 7518
Fax: +1 401 351 7220
La Residencia
Deià, Mallorca, Spain
Telephone: +34 971 63 90 11
Fax: +34 971 63 93 70
The Inn at Perry Cabin
St Michaels, Maryland
Telephone: +1 410 745 2200
Fax: +1 410 745 3348
La Samanna
St Martin, French West Indies
Telephone: +590 590 87 6400
Fax: +590 590 87 8786
The Observatory Hotel
Sydney, Australia
Telephone: +61 2 9256 2222
Fax: +61 2 9256 2233
Le Manoir aux Quat’Saisons
Oxfordshire, England
Telephone: +44 1844 278881
Fax: +44 1844 278847
The Orient-Express Gift Collection
London, England
Telephone: +44 20 7805 5019
Fax: +44 20 7805 5909
Lilianfels Blue Mountains
Katoomba, Australia
Telephone: +61 2 4780 1200
Fax: +61 2 4780 1300
The Royal Scotsman
Edinburgh, Scotland
U.K. telephone: +44 131 555 1344
Fax: +44 131 555 1345
U.S. telephone: +1 800 922 8625
Hotel Caruso
Ravello, Italy
Telephone: +39 0185 267898
Fax: +39 0185 267899
2
16
Chief Financial Officer’s report
3
Financial highlights
18
Awards received in 2004
4
Directors and management team
19
Financial review
6
Chairman’s message
44
Shareholder and investor information
8
President’s overview of performance
45
Reservation information
Above: Afloat in France operates five pénichehôtels – luxuriously-converted canal boats – which
travel through exceptional landscapes in Languedoc,
Burgundy and Provence. Arguably the most relaxed
and sybaritic way of experiencing the French
countryside, these lavishly equipped craft link great
cities with remote villages, traveling past forests,
fields and world-renowned vineyards. Guests enjoy
the services of a full crew on board, who serve
exceptional regional cuisine and arrange visits to
local sights.
Lapa Palace
Lisbon, Portugal
Telephone: +351 21 394 9494
Fax: +351 21 395 0665
Reid’s Palace
Funchal, Madeira, Portugal
Telephone: +351 291 71 7171
Fax: +351 291 71 7177
La Résidence d’Angkor
Siem Reap, Cambodia
Telephone: +855 63 963 390
Fax: +855 63 963 391
Harry’s Bar
London, England (A private club)
Company profile
La Cabaña
Buenos Aires, Argentina
Telephone and fax: +54 11 4814 0001
PeruRail
Hiram Bingham train, Cuzco-Machu Picchu
Telephone: +51 84 238 722
Fax: +51 84 221 114
Charleston Place
Charleston, South Carolina
Telephone: +1 843 722 4900
Fax: +1 843 722 0728
Grand Hotel Europe
St Petersburg, Russia
Telephone: +7 812 329 6000
Fax: +7 812 329 6001
3
Keswick Hall
Charlottesville,Virginia
Telephone: +1 434 979 3440
Fax: +1 434 977 4171
Orient-Express Safaris
Eagle Island Camp, Khwai River Lodge,
Savute Elephant Camp
Botswana, Southern Africa
Telephone: +27 11 274 1800
Fax: +27 11 481 6065
Road To Mandalay
Mandalay, Myanmar
U.K. telephone: +44 20 7960 0500
Fax: +44 20 7805 5908
U.S. telephone: +1 401 351 7518
Fax: +1 401 351 7220
El Encanto Hotel & Garden Villas
Santa Barbara, California
Currently under development.
Contents
Jimbaran Puri Bali
Bali, Indonesia
Telephone: +62 361 701 605
Fax: +62 361 701 320
Machu Picchu Sanctuary Lodge
Machu Picchu, Peru
Telephone: +51 84 21 1038
Fax: +51 84 21 1053
Hotel Cipriani and
Palazzo Vendramin
Venice, Italy
Telephone: +39 0 41 520 7744
Fax: +39 0 41 520 3930
Maroma Resort and Spa
Riviera Maya, Mexico
Telephone: +52 998 872 8200
Fax: +52 998 872 8220
Hôtel de la Cité
Carcassonne, France
Telephone: +33 468 71 98 71
Fax: +33 468 71 50 15
Miraflores Park Hotel
Lima, Peru
Telephone: +51 1 242 3000
Fax: +51 1 242 3393
Hotel Monasterio
Cuzco, Peru
Telephone: +51 84 24 1777
Fax: +51 84 24 6983
Mount Nelson Hotel
Cape Town, South Africa
Telephone: +27 21 483 1000
Fax: +27 21 483 1782
Hotel Ritz
Madrid, Spain
Telephone: +34 91 701 67 67
Fax: +34 91 701 67 76
Napasai
Koh Samui,Thailand
Telephone: +66 77 42 92 00
Fax: +66 77 42 92 01
Hotel Splendido and
Splendido Mare
Portofino, Italy
Telephone: +39 0185 267 800
Fax: +39 0185 267 804
Northern Belle
U.K.
U.K. telephone: +44 20 7690 0500
Fax: +44 20 7805 5908
U.S. telephone: +1 401 351 7518
Fax: +1 401 351 7220
www.orient-express.com
The Westcliff
Johannesburg, South Africa
Telephone: +27 11 646 2400
Fax: +27 11 646 3500
‘21’ Club
New York, New York
Telephone: +1 212 582 7200
Fax: +1 212 581 7138
Ubud Hanging Gardens
Bali, Indonesia
Telephone: +62 361 701 605
Fax: +62 361 701 320
Venice Simplon-Orient-Express
London-Paris-Venice
U.K. telephone: +44 20 7960 0500
Fax: +44 20 7805 5908
U.S. telephone: +1 401 351 7518
Fax: +1 401 351 7220
Villa San Michele
Florence, Italy
Telephone: +39 0 55 567 8200
Fax: +39 0 55 567 8250
Windsor Court Hotel
New Orleans, Louisiana
Telephone: +1 504 523 6000
Fax: +1 504 596 4513
ORIENT-EXPRESS HOTELS LTD.
45
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Page 1
www.orient-express.com
HOTEL CIPRIANI
Venice, Italy
PALAZZO VENDRAMIN
Venice, Italy
HOTEL SPLENDIDO
Portofino, Italy
VILLA SAN MICHELE
Florence, Italy
CAPANNELLE
Tuscany, Italy
HOTEL CARUSO
Ravello, Italy
HOTEL RITZ
Madrid, Spain
LA RESIDENCIA
Deià, Mallorca, Spain
LAPA PALACE
Lisbon, Portugal
REID'S PALACE HOTEL
Madeira, Portugal
HÔTEL DE LA CITÉ
Carcassonne, France
GRAND HOTEL EUROPE
St Petersburg, Russia
HARRY’S BAR
London, England
LE MANOIR AUX QUAT’SAISONS
Chef-Proprietor Raymond Blanc
Oxfordshire, England
‘21’ CLUB
New York, New York
INN AT PERRY CABIN
St Michaels, Maryland
KESWICK HALL
Charlottesville,Virginia
WINDSOR COURT HOTEL
New Orleans, Louisiana
CHARLESTON PLACE
Charleston, South Carolina
EL ENCANTO
Santa Barbara, California
MAROMA RESORT AND SPA
Riviera Maya, Mexico
LA SAMANNA
St Martin, French West Indies
MOUNT NELSON HOTEL
Cape Town, South Africa
THE WESTCLIFF
Johannesburg, South Africa
ORIENT-EXPRESS SAFARIS
Eagle Island Camp, Botswana
ORIENT-EXPRESS SAFARIS
Khwai River Lodge
Botswana
ORIENT-EXPRESS SAFARIS
Savute Elephant Camp
Botswana
THE OBSERVATORY HOTEL
Sydney, Australia
LILIANFELS BLUE MOUNTAINS
Katoomba, New South Wales,
Australia
PANSEA HOTELS & RESORTS
Siem Reap, Bali, Koh Samui,
Luang Prabang,Yangon,
Southeast Asia
COPACABANA PALACE
Rio de Janeiro, Brazil
LA CABAÑA
Buenos Aires, Argentina
MIRAFLORES PARK HOTEL
Lima, Peru
HOTEL MONASTERIO
Cuzco, Peru
MACHU PICCHU
SANCTUARY LODGE
Machu Picchu, Peru
BORA BORA LAGOON
RESORT & SPA
Bora Bora, French Polynesia
PERURAIL
Peru
VENICE SIMPLON-ORIENT-EXPRESS
London, Paris,Venice
BRITISH PULLMAN
South of England
NORTHERN BELLE
North of England
THE ROYAL SCOTSMAN
Scotland
EASTERN & ORIENTAL EXPRESS
Southeast Asia
ROAD TO MANDALAY
Irrawaddy River, Burma
(Myanmar)
AFLOAT IN FRANCE
France
3470-AR-04
HOTEL SPLENDIDO MARE
Portofino, Italy
Orient-Express Hotels Ltd. Annual Report 2004
Orient-Express Hotels Ltd.
Orient-Express Hotels Ltd.
2004 A NNUAL R EPORT