Orient-Express Hotels has announced its results for the
fourth quarter and full year ended December 31, 2005 with a significant earnings reduction.For the quarter net earnings were $4.4 million ($0.11 per common share)
on revenue of $102.5 million, a decrease of 48% from net earnings of
$8.4 million in the year earlier period. Earnings per common share were
55% lower and revenue was up 7%.
The earnings reduction was caused by two special events. The major
adverse impact on the quarter was the consequence of hurricanes Emily
and Wilma which damaged the Maroma Resort and Spa on the Mayan Riviera
in Mexico and hurricanes Katrina and Rita which damaged the Windsor
Court Hotel in New Orleans. The estimated cost of these hurricanes
during the quarter, net of insurance recoveries, was $2.4 million. The
second event was the unexpected 22% strengthening of the Brazilian real
against the U.S. dollar which left the company with costs in reis and
fixed dollar revenue commitments, resulting in a $1.6 million reduction
Maroma re-opened on February 21st with most of its room stock on line.
The balance along with 8 new suites which were under construction when
the storms hit, will open progressively through June. The closure has
given the company the opportunity to make a number of fundamental
improvements which should greatly enhance future profitability. The
Cancun Airport is now repaired and flights are increasing. Hotels in the
area are progressively re-opening and are currently enjoying better than
80% occupancies. Maroma’s magnificent beach is back to normal and
foundations of buildings along the beach, which suffered most of the
damage in the hurricanes, have been reinforced to minimize such damage
from future hurricanes.
The Windsor Court re-opened on November 1st, with President Bush and his
party occupying four floors of guest rooms. 280 of the hotel’s 334
suites are now back in service with most of the remainder being occupied
by staff and contractors. The hotel has been operating with better than
80% occupancy but only with half the usual staff (155 vs. the normal
320). The hotel’s main competitor, the Ritz Carlton, has said they will
not re-open before 2007. Normal restaurant and bar service is being
provided but room service is somewhat curtailed. The top floor
banqueting rooms are fully restored. Several smaller banqueting rooms on
the second floor level have been repaired and are being redecorated.
Three buildings across the street from this part of the hotel caught
fire and collapsed, causing some scorching of the hotel and damage to
these banqueting rooms. All damaged windows in the hotel have now been
replaced. Fortunately, the tourist and commercial centers of New Orleans
were relatively unscathed by the hurricanes. The convention center
recently re-opened and the Superdome will host its first Saints’
football game in September.
In the case of Brazil, the company has now realigned its dollar tariffs
with the new value of the real. Brazil is enjoying a healthy trade
balance based on agricultural and iron ore exports, elimination of World
Bank debt and self-sufficiency in energy. The real is not expected to
strengthen further as much and as quickly as it did in the latter part
For the year ended December 31, 2005 net earnings were $40.7 million
($1.07 per common share) compared with $28.2 million ($0.82 per common
share) in 2004, an increase of 44% in net earnings and 30% in earnings
per common share. Revenue increased 21% from $369 million in 2004 to
$447.7 million in 2005. Same store RevPAR increased 11% and EBITDA rose
37% from $79 million to $108.3 million.
Mr James B Sherwood, Chairman, said that in Europe the fourth quarter
results from the company’s hotels were impacted by closure of La
Residencia in Mallorca for major works (addition of rooms) and earlier
than normal winter closure of some Italian hotels, also for construction
works. Portuguese hotels reported improved results. North American hotel
results were down because of Maroma and the Windsor Court explained
above. South American hotels reported solid gains despite the currency
problem in Brazil, as did South Pacific hotels, restaurants, management
fees, tourist trains and river cruises.
Mr Sherwood indicated that Reid’s in Madeira would be closed in the
first quarter of 2006 for major works and La Residencia would not
re-open until April 1st. Italian hotels will re-open at the normal time.
He said that the company had acquired its 50th property a few weeks
earlier, Casa de Sierra Nevada in San Miguel de Allende, a historic
colonial town north of Mexico City. The hotel had been created many
years ago by a member of the family which owns the Hassler Hotel in
Rome, Peter Wirth, and the company had sought to acquire it once before.
The purchaser from Mr Wirth, Mr James Sprowls, had offered the property
to Orient-Express Hotels, recalling the company’s prior interest, and
75% equity together with management have now been obtained. Additional
buildings and land have also been acquired, allowing for expansion of
the hotel. “This hotel is unique in this region and although it will
require investment to reach its full potential we think it will be a
very successful addition to our portfolio”, he said.
“In terms of forward direction for the company we think that addition of
more hotels, increase in rooms and facilities in those of our hotels
which are capacity constrained, property development such as is in
progress at La Samanna and expansion of rail and water based operations
should be our priorities.” he concluded.
Mr Simon M C Sherwood, President, said that in 2005’s fourth quarter
same store RevPAR increased by 6% to $207 from $196 in the year earlier
period. EBITDA margin for the quarter was 22% compared with 20% in the
prior year period.