Orient-Express Hotels Announces Third Quarter Results

HAMILTON, Bermuda, November 7 /PRNewswire-FirstCall/ --

- Ebitda $59.2 Million, Up 20% Over Prior Year - Pre-Tax Earnings $34.8 Million, Up 36% Over 2006 - Net Earnings of $22.6 Million - Adjusted Net Earnings of $25.3 Million Reconciliation and Adjustments ------------------------------------------------------------------------ $'000 - except per share Three months ended Nine months amounts September 30 ended September 30 ------------------------------------------------------------------------ 2007 2006 2007 2006 ------------------------------------------------------------------------ EBITDA 59,154 49,492 123,151 105,742 Adjustment - gain on investment sale - - - (6,619) Adjustment - insurance related gain (2,312) - (2,312) - Adjustment - management restructuring and related charges 1,979 - 2,851 - Adjusted EBITDA 58,821 49,492 123,690 99,123 ------------------------------------------------------------------------ U.S. GAAP reported net earnings 22,553 20,430 38,575 33,110 Adjusted items - net of tax: - Gain on asset sale - - - (3,294) - Foreign exchange loss 2,171 1,952 1,413 3,642 - Insurance related gain (1,664) - (1,664) - - FIN 48 charge 247 - 954 - - Management restructuring and related charges 1,979 - 2,851 - - Write-off of deferred finance costs - 1,618 - 1,618 ------------------------------------------------------------------------ Adjusted net earnings 25,286 24,000 42,129 35,076 Adjusted EPS 0.60 0.58 0.99 0.87 Reported EPS 0.53 0.49 0.91 0.82 Number of shares (millions) 42.4 41.7 42.4 40.2 Third quarter highlights: - Revenue up 26% over prior year - Adjusted EBITDA up 19% over prior year

- World-wide same store RevPAR up 9% in local currency, 15% in U.S. dollars

- Projects moving ahead in Brazil, Peru, Bali and California - New York hotel project announced with expansion of '21' Club

Orient-Express Hotels Ltd. , owners or part-owners and managers of 50 luxury hotel, restaurant, tourist train and river cruise properties operating in 25 countries, today announced its results for the third quarter ended September 30, 2007.

For the third quarter net earnings were $22.6 million ($0.53 per common share) on revenue of $189.7 million, an increase of 10% over net earnings of $20.4 million ($0.49 per common share) in the same quarter in 2006. Adjusted net earnings were $25.3 million ($0.60 per common share) compared to adjusted net earnings of $24.0 million ($0.58 per common share) in the prior period. Net earnings for the nine months were $38.6 million ($0.91 per common share) on revenue of $457.1 million, an increase in net earnings of 17% from $33.1 million in the year earlier period. Earnings per common share increased 11% and revenue was up 23% over the first nine months of 2006. Adjusted net earnings for the nine months were $42.1 million ($0.99 per common share), compared to adjusted net earnings of $35.1 million ($0.87 per common share) in the first nine months of 2006, a 20% increase.

Total revenue grew 26% in the third quarter, underpinned by the European, Rest of World, and Trains and Cruises portfolios. Revenues from Real Estate were $14.1 million, an increase of $13.7 million over the same period in 2006, as the Cupecoy project begins to yield revenues. Worldwide same store RevPAR growth in local currency increased 9% over the same period in 2006 and margins were consistent with those in the same period in 2006, as expected in the high season quarter.

Business Highlights

On November 7th 2007 the company announced that it had signed an agreement to acquire the land and building of the Donnell branch of the New York Public Library, located at 24 West 53rd Street, New York City. On this site Orient-Express plans to build a 150-room luxury hotel, including a rebuilt "state-of-the-art" Donnell Library located within it. The hotel will house contemporary dining, spa and wellness facilities, as well as expanded banqueting and dining space for the company's existing restaurant and dining business, '21' Club, which is adjacent to the Library premises in its location at 21 West 52nd Street. The property will be marketed under a new '21' Hotel brand name. The original '21' Club, a location in the heart of midtown Manhattan, with enhanced facilities. The overall project is estimated at $220 million inclusive of the purchase of the Library. Subject to necessary permits, construction is scheduled to start in 2009 and the hotel is planned to be in operation by early 2011.

On October 1st 2007, the company took over the operation of Hotel das Cataratas at Iguacu Falls, Brazil, and announced that it will commence a refurbishment program in the low season, starting April 2008. In Phase One, to be completed by September 2008, 80 of the 200 rooms will be renovated and upgraded and a new outdoor restaurant and pool constructed, at an estimated cost of $8.4 million. A second phase of renovations will take place in 2009.

In Asia, as previously reported, the company has successfully leased an additional 11,300 sq.m. (3 acres) of land abutting its hotel Jimbaran Puri Bali in Bali, Indonesia. Construction has now started on 22 new 300 sq.m. pool cottages on this site, scheduled to open in time for the Christmas peak in December 2008.

In Santa Barbara, California, work is progressing well on the $65 million restoration of El Encanto. This 91 key historic property, on a 7 acre site with mature gardens overlooking the Pacific Ocean, will reopen in the second quarter of 2009. The Santa Barbara luxury hotel market remains strong, with demand outstripping supply.

On the 11,000 ft. high rim of the Colca Canyon, Peru, the company's 20-key casita development is on schedule for opening in April 2008. The casitas themselves are sensitively designed to blend with their environment. The hotel will have a luxurious spa, a free-form swimming pool which blends into the landscape and an intimate dining room with an open kitchen where chefs turn home-grown produce into delicious cuisine.

Regional Performance

Europe: EBITDA of owned hotels grew 18% to $38.3 million. The Italian properties reported a combined EBITDA of $22.5 million, an increase of 29%, over the same period in 2006. The other properties contributing to the growth were Le Manoir aux Quat'Saisons, England, and La Residencia, Mallorca. Same store RevPAR in Europe grew by 8% in local currency and 15% in U.S. dollars.

North America: EBITDA of owned hotels was $0.9 million, a drop of $2.9 million over the prior year period. The 2006 result included business interruption insurance proceeds of $3.4 million in respect of the Windsor Court Hotel in New Orleans and Maroma Resort and Spa in Mexico. In the current year period, Maroma Resort and Spa recorded a gain of $2.3 million relating to the settlement of insurance proceeds. Same store RevPAR in North America (excluding El Encanto and Casa de Sierra Nevada that were closed during the 2007 and 2006 quarters respectively) grew by 11%.

Southern Africa: EBITDA of the Southern Africa portfolio grew by $0.8 million to $2.3 million, in what is traditionally the low season. The performance was underpinned by a strong quarter for the Mount Nelson, and the results of Orient-Express Safaris.

South America: EBITDA for the quarter was $0.4 million below that of the same period in 2006, due in the main to the impact of a very strong Brazilian Real on the U.S. Dollar earnings of the Copacabana Palace.

Asia Pacific: EBITDA of owned hotels was $0.4 million below that of the prior year period at $1.6 million. The key factor impacting the results was the performance of our hotel and river cruiser in Myanmar, which suffered due to political instability in the country.

Hotel management fees and part-ownership interests: EBITDA was $5.8 million compared with $4.7 million in the year earlier period. Earnings from Charleston Place

were up 20% and earnings from Hotel Ritz Madrid were up $0.3 million, as the hotel and city of Madrid see market improvements.

Restaurants: EBITDA decreased $0.1 million to a loss of $0.2 million. The third quarter is traditionally the lowest earnings quarter of this segment due to the closure of '21' Club in the month of August.

Tourist trains and river cruises: EBITDA was $9.6 million compared with a prior year EBITDA of $7.0 million, a 37% increase. The performance of the Venice Simplon-Orient-Express and the Royal Scotsman were particular highlights during the quarter.

Real Estate: Revenues for the quarter were $14.1 million, compared with $0.4 million in the same period in 2006. These revenues were mainly from the company's Cupecoy project, in St. Maarten. Cupecoy currently has signed sales contracts to the value of $49.6 million and the major construction contracts are let, with over $31 million disbursed. Under the percentage-completion method of accounting, this has resulted in recognition of a total of $3.0 million in earnings.

Tax: Earnings before tax for the nine months were $59.4 million, an increase of $17.9 million from $41.5 million in the first nine months of 2006. The tax charge for the nine months was $20.8 million compared to $8.4 million in the prior year. The 2006 tax charge included a $8.8 million tax credit arising on the recognition of tax losses carried forward in Bora Bora, Australia and Portugal. The 2007 charge reflects the mix of profitability across the jurisdictions in which the company operates, particularly in Europe. The 2007 charge also includes a tax charge of $1.0 million in respect of the company's FIN 48 liability. The company adopted FIN 48 on January 1, 2007, accordingly there is no comparable cost in the prior year.

"Globally, we continue to see strong demand among the high-end consumers for Orient-Express and we continue to invest in innovative new properties in key markets," said Paul White, President and Chief Executive Officer of Orient-Express Hotels Ltd. "We believe that recent developments indicate early success in our initiatives to reorganize our management structure and the way we operate the business in key geographic areas."

Management believes that EBITDA (net earnings adjusted for interest expense, foreign currency, tax, depreciation and amortization) is a useful measure of operating performance, for example to help determine the ability to incur capital expenditure or service indebtedness, because it is not affected by non-operating factors such as leverage and the historic cost of assets. EBITDA is also a financial performance measure commonly used in the hotel and leisure industry, although the company's EBITDA may not be comparable in all instances to that disclosed by other companies. EBITDA does not represent net cash provided by operating, investing and financing activities under U.S. generally accepted accounting principles (U.S. GAAP), is not necessarily indicative of cash available to fund all cash flow needs, and should not be considered as an alternative to earnings from operations or net earnings under U.S. GAAP for purposes of evaluating operating performance.

Adjusted net earnings and adjusted E.P.S. are non-GAAP financial measures and do not have any standardized meanings prescribed by U.S. GAAP. They are, therefore, unlikely to be comparable to similar measures presented by other companies, which may be calculated differently, and should not be considered as an alternative to net earnings, cash flow from operating activities or any other measure of performance prescribed by U.S. GAAP. Management considers adjusted net earnings and adjusted E.P.S. to be meaningful indicators of operations and uses them as measures to assess operating performance. Adjusted net earnings and adjusted E.P.S. are also used by investors, analysts and lenders as measures of financial performance.

This news release contains, in addition to historical information, forward-looking statements that involve risks and uncertainties. These include statements regarding earnings outlook, 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 news release, 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 hotel bookings and reservations and planned property development sales 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 or development projects, delays in reopening properties closed for repair or refurbishment and possible cost overruns, shifting patterns of tourism and business travel and seasonality of demand, adverse local weather conditions, uncertainty of recovering on insurance claims for property damage and lost earnings, 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 with the U.S. Securities and Exchange Commission.

Orient-Express Hotels will conduct a conference call on November 8, 2007 at 10.00 AM (ET) which is accessible at 1-866-966-9439 (US toll free) or +44 1452-555566 (Standard International access). The conference ID is 18193995. A re-play of the conference call will be available until 5.00pm (ET) Thursday, November 15, 2007 and can be accessed by calling 1-866-247-4222 (US toll free) or +44-1452-550-000 (Standard International) and entering replay access number 18193995. A re-play will also be available on the company's website: http://www.orient-expressinvestorinfo.com/.

Three Months ended September 30, 2007 Summary of operating results --------------------------------------------------------------------- Three months ended September 30 ------------------ $'000 - except per share amount 2007 2006 --------------------------------------------------------------------- Revenue and earnings from unconsolidated companies Owned hotels - Europe 86,728 72,569 - North America 17,908 21,158 - Rest of World 32,320 26,308 Hotel management & part ownership interests 5,757 4,721 Restaurants 3,439 3,511 Trains & Cruises 29,468 21,862 Real Estate 14,073 387 ------------------- Total (1) 189,693 150,516 ------------------- Analysis of earnings Owned hotels - Europe 38,254 32,484 - North America 944 3,862 - Rest of World 7,078 7,201 Hotel management & part ownership interests 5,757 4,721 Restaurants (237) (128) Trains & Cruises 9,555 7,001 Real Estate 3,160 (583) Central overheads (7,669) (5,066) Gain on sale of investment - - Gain on disposal of fixed assets 2,312 - ------------------- EBITDA 59,154 49,492 Depreciation & amortization (10,254) (8,960) Interest (12,642) (12,117) Foreign exchange (1,474) (2,752) ------------------- Earnings before tax 34,784 25,663 Tax (12,231) (5,233) ------------------- Net earnings on common shares 22,553 20,430 ------------------- Earnings per common share 0.53 0.49 ------------------- 42.44 41.69 Number of shares - millions -------------------

(1) Comprises earnings from unconsolidated companies of $6,782,000 (2006 - $5,752,000) and revenue of $182,911,000 (2006 - $144,764,000).

Three Months Ended September 30, 2007 SUMMARY OF OPERATING INFORMATION FOR OWNED HOTELS -------------------------------------------------- Three months ended September 30 ------------------- 2007 2006 -------------------------------------------------- Average Daily Rate (in U.S. dollars) Europe 815 670 North America 302 284 Rest of World 262 245 Worldwide 481 427 Rooms Available (000's) Europe 92 92 North America 55 53 Rest of World 108 100 Worldwide 255 245 Rooms Sold (000's) Europe 63 65 North America 34 36 Rest of World 68 59 Worldwide 165 160 RevPAR (in U.S. dollars) Europe 557 478 North America 189 193 Rest of World 166 145 Worldwide 313 280 Change % Same Store RevPAR Dollar Local currency (in U.S. dollars) Europe 532 464 15% 8% North America 313 282 11% 11% Rest of World 185 156 18% 13% Worldwide 359 311 15% 9% Nine Months ended September 30, 2007 SUMMARY OF OPERATING RESULTS --------------------------------------------------------------------- Nine months ended September 30 -------------------- $'000 - except per share amount 2007 2006 --------------------------------------------------------------------- Revenue and earnings from unconsolidated companies Owned hotels - Europe 184,842 146,146 - North America 63,032 62,893 - Rest of World 95,671 78,519 Hotel management & part ownership interests 17,433 14,365 Restaurants 14,377 14,627 Trains & Cruises 66,798 50,873 Real Estate 14,920 4,538 Total (1) 457,073 371,961 Analysis of earnings Owned hotels - Europe 66,477 49,585 - North America 10,379 13,504 - Rest of World 23,223 20,342 Hotel management & part ownership interests 17,433 14,365 Restaurants 1,919 2,461 Trains & Cruises 19,415 12,529 Real Estate 2,678 1,290 Central overheads (20,685) (14,953) Gain on sale of investment - 6,619 Gain on disposal of fixed assets 2,312 - EBITDA 123,151 105,742 Depreciation & amortization (29,389) (26,268) Interest (34,141) (32,462) Foreign exchange (221) (5,548) Earnings before tax 59,400 41,464 Tax (20,825) (8,354) Net earnings on common shares 38,575 33,110 Earnings per common share 0.91 0.82 Number of shares - millions 42.37 40.20

(1) Comprises earnings from unconsolidated companies of $15,882,000 (2006 - $13,241,000) and revenue of $441,191,000 (2006 - $358,720,000)

Nine Months Ended September 30, 2007 SUMMARY OF OPERATING INFORMATION FOR OWNED HOTELS -------------------------------------------------- Nine months ended September 30 --------------------- 2007 2006 -------------------------------------------------- Average Daily Rate (in U.S. dollars) Europe 713 611 North America 366 318 Rest of World 265 269 Worldwide 434 396 Rooms Available (000's) Europe 247 225 North America 166 157 Rest of World 323 269 Worldwide 736 651 Rooms Sold (000's) Europe 149 139 North America 107 113 Rest of World 204 166 Worldwide 460 418 RevPAR (in U.S. dollars) Europe 432 376 North America 235 228 Rest of World 168 166 Worldwide 271 254 Change % Same Store RevPAR Dollar Local currency (in U.S. dollars) Europe 485 414 17% 10% North America 340 319 7% 7% Rest of World 188 171 10% 9% Worldwide 313 276 13% 9% CONSOLIDATED AND CONDENSED BALANCE SHEETS (UNAUDITED) -------------------------------------------------------------------- September 30 December 31 $'000 2007 2006 -------------------------------------------------------------------- Assets Cash 85,222 79,318 Accounts receivable 67,521 74,327 Due from related parties 29,598 19,939 Prepaid expenses 22,163 9,485 Inventories 45,595 35,789 Real estate assets 46,986 35,821 Total current assets 297,085 254,679 Property plant & equipment, net book value 1,295,589 1,183,400 Investments 141,733 130,124 Goodwill 139,340 121,651 Other intangible assets 22,022 20,149 Other assets 47,829 41,660 1,943,598 1,751,663 Liabilities and Shareholders' Equity Working capital facilities 58,358 46,590 Accounts payable 28,845 26,227 Due to related parties - 1,249 Accrued liabilities 65,582 55,916 Deferred revenue 38,623 25,501 Current portion of long-term debt and capital 164,088 83,397 leases Total current liabilities 355,496 238,880 Long-term debt and obligations under capital 572,323 586,300 leases Deferred income taxes 120,181 106,598 Other liabilities 43,197 11,007 Minority interest 1,551 1,882 Shareholders' equity 850,850 806,996 1,943,598 1,751,663