Orient-Express Hotels Reports First Quarter 2011 Results

Orient-Express Hotels Reports First Quarter 2011 Results

“We are very pleased with our results for the quarter, which demonstrate the continued recovery of the luxury travel market, as well as the value of Orient-Express’ iconic assets and the unparalleled experience that we offer our guests”, said Paul White, President and Chief Executive Officer. “Same store RevPAR overall was up 8% in US dollars. In addition, revenues in all geographic regions grew, with overall Revenue before Real Estate up 17%, showing our Company’s ability to improve revenue in all areas, not just rooms. In Brazil and Asia Pacific signs of growth were stronger, with local currency RevPAR up 10% and 27% respectively.”

Business Highlights

Revenue, excluding Real Estate, was $99.6 million in the first quarter of 2011, up $14.2 million from the first quarter of 2010.

Revenue from Owned Hotels for the first quarter was $88.9 million, up $10.1 million from the first quarter of 2010. On a same store basis, Owned Hotels RevPAR was up 6% in local currency and up 8% in US dollars.

Trains and Cruises revenue in the first quarter was $7.5 million compared to $4.9 million in the first quarter of 2010.

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Adjusted EBITDA before Real Estate was $1.9 million compared to $0.8 million in the prior year. The principal variances from the first quarter of 2010 included the Brazilian hotels (up $1.1 million), share of earnings from Peru hotels (up $1.0 million), Trains and Cruises (up $1.0 million), La Samanna, St Martin (up $0.7 million), Reid’s Palace, Madeira (up $0.6 million) and Le Manoir aux Quat’Saisons, Oxfordshire (up $0.5 million), offset by Southern African hotels (down $0.9 million), Grand Hotel Europe, St Petersburg (down $0.7 million) and Maroma Resort & Spa, Riviera Maya (down $0.7 million).

Adjusted net losses from continuing operations for the period were $14.4 million (loss of $0.14 per common share), compared with $18.2 million ($0.21 per common share) in the first quarter of 2010. Net loss for the period was $14.7 million (loss of $0.14 per common share), compared with a net loss of $12.8 million (loss of $0.15 per common share) in the first quarter of 2010.

In March, the Company announced an agreement to assign its purchase and development agreements made with the New York Public Library in regard to the site of the Donnell branch on West 53rd Street, New York City, to an affiliate of Tribeca Associates, LLC and Starwood Capital Group Global, LLC. The assignee has assumed all the terms and obligations of the original contracts and reimbursed the Company $25.5 million in April.

Two of the Company’s Italian hotels reopened for the season during the quarter, Hotel Cipriani and Grand Hotel Timeo. Ten rooms at Hotel Cipriani were refurbished over the winter period in Venetian pastel hues, with Carrara marble bathrooms and Rubelli fabrics and a new 122 square meter retail space was created within the hotel, housing a Hotel Cipriani signature boutique and three stylish outlets by Venetian jewellery, Fortuny silk and traditional Burano lace producers.

Grand Hotel Timeo reopened in March and the nearby Villa Sant’Andrea reopened in April after the completion of a EUR2.0 million ($2.7 million) second phase of renovations. At the Grand Hotel Timeo, the pool restaurant terrace has been extended, five double rooms converted into two junior suites and a two-bedroom suite with terrace, and 13 rooms in the Villa Flora annexe refurbished. At Villa Sant’Andrea during the same period, 12 rooms were reconfigured to create nine suites and junior suites with large bathrooms, and a heated infinity pool built that is directly accessible either from the hotel or from its private beach overlooking the Bay of Mazzaro.

Several of the Company’s properties received important recognition during the quarter. Centurion magazine, published globally for American Express black card holders, announced their first Readers’ Choice survey in March. Hotel Cipriani was voted Europe’s Favorite Family Hotel, whilst La Residence d’Angkor, Cambodia, was second Favorite Small Boutique Hotel in Asia Pacific, Hotel Splendido, Portofino, was third Favorite Luxury Resort in Europe, and Copacabana Palace, Rio de Janeiro, was third Favorite Spa and Wellness Hotel in the Americas.

In addition, the Sunday Times Travel Magazine (UK) announced their annual readers’ awards this quarter. La Residencia, Mallorca, was voted number one European Resort Hotel and described by readers as ‘timeless’ and ‘style personified’. Also in the UK, the Venice Simplon-Orient-Express was honored as Best Rail Operator at the Globe Travel Awards, voted for by travel agents across the country.

Finally, in April, the Company announced a slate of eight directors for election to the Board at the 2011 Annual General Meeting of Shareholders, to be held on June 9, 2011, including two new independent nominees, Harsha V. Agadi, 48, Chairman and Chief Executive Officer of Friendly Ice Cream Corporation and Philip R. Mengel, 66, an Operating Partner of Snow Phipps Group LLC. As previously announced, Chairman James B. Hurlock, 77, and Founder, former Chairman and Director James B. Sherwood, 77, will retire from the Board at the end of their current terms and will not stand for re-election at the AGM. Sherwood will become Founder & Chairman Emeritus. The Board expects that Jesse Robert (Bob) Lovejoy, 66, a director since 2000, will become Chairman following the 2011 AGM.

Regional Performance

Europe:

In the first quarter, revenue from Owned Hotels was $14.7 million, up 13% from $13.0 million in the first quarter of 2010. Year on year revenue at Le Manoir aux Quat’Saisons increased by $0.9 million or 24% due to increased publicity following a recent television series and a brief closure for refurbishment during part of the first quarter of 2010. Same store local currency RevPAR was up 7% from the prior year (up 8% in US dollars). EBITDA during a quarter where many of the European properties are closed for at least part of the period was a loss of $6.9 million compared to a loss of $7.5 million in the first quarter of 2010.

North America:

Revenue from Owned Hotels was $29.2 million, up 7% from $27.3 million in the first quarter of 2010, due to occupancy and rate driven increases in revenue at La Samanna and Charleston Place, Charleston, offset by a decline at Maroma Resort & Spa in Mexico where media reports of drug related violence have impacted market demand generally to the country. Same store local currency RevPAR increased by 3%. EBITDA was $5.2 million compared to $5.4 million in the first quarter of 2010 with strong growth at La Samanna, offset by a lower result at Maroma Resort & Spa.

Rest of World:

Southern Africa:

First quarter revenue was $8.8 million, compared to $8.9 million in the first quarter of 2010. Same store local currency RevPAR was down 10% (down 4% in US dollars). EBITDA was $1.4 million, compared to $2.3 million in the first quarter of 2010. EBITDA at the South African properties was negatively impacted by new competition in both Cape Town and Johannesburg and a stronger Rand, both resulting in pressure on rates and margins.

South America:

Revenue increased by 22% to $24.4 million in the first quarter of 2011, from $20.0 million in the first quarter of 2010. Year on year revenue increased at Hotel das Cataratas, Iguassu Falls by $1.8 million or 53% following the major refurbishment that was completed in November 2010. Year on year revenue increased at Copacabana Palace by $2.4 million or 16%, driven by a 19% growth in average rate. Same store RevPAR increased by 11% in both local currency and US dollars. EBITDA was $7.4 million, compared to $6.0 million last year, an increase of 23%. Local inflationary pressures and a stronger Real impacted margins in the quarter.

Asia Pacific:

Revenue for the first quarter of 2011 was $11.7 million, an increase of $2.1 million or 22% year over year, with growth seen across all properties. Same store RevPAR increased by 27% in both local currency and US dollars. EBITDA of $2.8 million was unchanged from the first quarter of 2010.

Hotel management and part-ownership interests:

EBITDA for the first quarter of 2011 was a loss of $0.2 million compared to an EBITDA loss of $1.3 million in the first quarter of 2010. The improvement is largely attributable to the Company’s share of results from Peru hotels as the first quarter of 2010 was negatively impacted by flooding and landslides in the country.

Restaurants:

Revenue from ‘21’ Club, New York, in the first quarter of 2011 was $3.3 million compared to $3.1 million in the same quarter of 2010, and EBITDA was unchanged from 2010 at $0.1 million.

Trains and Cruises:

Revenue increased by $2.6 million to $7.5 million in the first quarter of 2011, an increase of 53% year over year, and EBITDA improved by $0.9 million from a loss of $1.7 million to a loss of $0.8 million. The share of results from PeruRail for the first quarter increased by $1.6 million from 2010 as PeruRail was closed for much of the first quarter in 2010 due to flooding and landslides in the country.

Central costs:

In the first quarter of 2011, central costs increased by $0.1 million to $7.7 million compared with $7.6 million in the prior year period.

Real Estate:

In the first quarter of 2011, there was an EBITDA loss of $1.1 million from Real Estate activities, primarily related to Porto Cupecoy, Sint Maarten, compared with a loss of $1.3 million in the first quarter of 2010. During the quarter, nine units were sold and the Company recognized $1.6 million of revenue from five units transferred to customers. Cumulatively, at the end of the quarter, 112 units or 61% of the total had been sold and the legal title of 100 units had been transferred.

Also during the quarter, one of the model homes at Keswick Estate, Virginia was sold for $1.9 million.

Gain on disposal:

During the quarter, there was a gain on disposal of $0.6 million, as the assignment of the agreements for the Company’s New York hotel project to a developer resulted in proceeds net of costs greater than the carrying value of the asset.

Depreciation and amortization:

The depreciation and amortization charge for the first quarter of 2011 was $11.3 million compared with $11.1 million in the first quarter of 2010.

Interest:

The interest charge for the first quarter of 2011 was $9.3 million up from $6.8 million in the first quarter of 2010. In the first quarter of 2010 $2.0 million of interest was capitalized at Porto Cupecoy and in respect of the newly acquired Sicilian hotels which were closed for refurbishment.

Tax:

The tax credit for the first quarter of 2011 was $5.0 million, compared to a charge of $0.3 million for the same quarter in the prior year. The first quarter of 2011 had no charge in respect of valuation allowances, compared to a $2.0 million charge in the prior year quarter, and included an ASC 740 credit concerning uncertain tax positions of $2.1 million compared to an ASC 740 charge of $0.5 million in the first quarter of 2010.

Discontinued operations:

Losses from discontinued operations in the quarter were $0.8 million. Discontinued operations in the first quarter of 2011 include Hotel de la Cite, Carcassonne and Bora Bora Lagoon Resort, French Polynesia.

Investment:

The Company invested $13.1 million during the quarter, including $2.0 million at Hotel Cipriani, $1.4 million at El Encanto, Santa Barbara, $1.7 million at the two new Sicilian properties and $1.1 million on the Venice Simplon-Orient-Express. In addition, the Company made payments of a further $1.5 million to the New York Public Library which were reimbursed as part of the $25.5 million received in April 2011.

Liquidity

At March 31, 2011, the Company had long-term debt (including the current portion and debt of consolidated variable interest entities) of $741.7 million, and cash balances of $131.5 million (including $14.3 million of restricted cash), giving a total net debt of $610.2 million compared with total net debt of $570.8 million at the end of the fourth quarter of 2010. The increase in net debt is due to cash used in operations during the first quarter and to foreign exchange movements impacting the US dollar value of foreign currency denominated debt.

Undrawn amounts available to the Company at March 31, 2011 under short-term lines of credit were $10.4 million and undrawn amounts available to the Company under secured revolving credit facilities were $12.0 million, bringing total cash availability (excluding restricted cash) at March 31, 2011, to $139.6 million.

At March 31, 2011, approximately 54% of the Company’s debt was at fixed interest rates and 46% was at floating interest rates. The weighted average maturity of the debt was approximately 3.2 years and the weighted average interest rate (including margin and swaps) was approximately 4.5%.

At March 31, 2011, excluding revolving credit facilities of $28.0 million which are available for redrawing, the Company had $114.8 million of debt repayments due within 12 months which are expected to be met through refinancing the facilities and utilizing available cash.