Orient-Express Hotels Announces Fourth Quarter and Year End Results

HAMILTON, Bermuda, February 26 /PRNewswire-FirstCall/ --

Reconciliation and Adjustments $'000 - except per share Three months ended Twelve months amounts December 31 ended December 31 2006 2005 2006 2005 Restated Restated 32,353 22,079 138,095 108,256 EBITDA Adjustment - gain on asset - - (6,619) - sale Adjustment - UK Pension 841 - 841 - closure costs Adjusted EBITDA 33,194 22,079 132,317 108,256 6,657 4,540 39,767 41,539 US GAAP reported net earnings Adjusted items: - Write-off of deferred 1,671 - 3,546 - finance costs - Depreciation write-off on 401 - 401 - El Encanto - UK Pension closure costs 841 - 841 - - Forex loss/(gain) net of tax (366) (665) 3,281 (4,853) - Gain on asset sales (net of tax) - - (3,294) - Adjusted net earnings 9,204 3,875 44,572 36,686 0.22 0.10 1.10 0.96 Adjusted EPS Reported EPS 0.16 0.12 0.98 1.09 Number of shares (millions) 42.2 39.4 40.7 38.2 Fourth Quarter highlights:

- Worldwide same store RevPAR growth of 15% in U.S.$ and 13% in local currency

- EBITDA up 47% to $32.4 million compared to the same quarter last year - EBITDA margin 23.4% up 190 bps compared to the same quarter last year - Reported EPS up 33%, adjusted EPS up 120% Full Year highlights: - 7 hotels acquired and integrated - Worldwide same store RevPAR up 10% in U.S.$ and 11% in local currency - EBITDA up 28%, adjusted EBITDA up 22%

Orient-Express Hotels Ltd. (http://www.orient-express.com/), owners or part-owners and managers of luxury hotels, restaurants, tourist trains and river cruise properties in 25 countries, today announced its results for the fourth quarter and full year ended December 31, 2006.

For the fourth quarter net earnings were $6.7 million ($0.16 per common share) on revenue of $138.6 million compared with restated earnings of $4.5 million ($0.12 per common share) on revenue of $102.5 million in the prior year period. Adjusted net earnings (before foreign exchange losses and refinancing costs) for the quarter were $9.2 million ($0.22 per common share), an increase of 138% over restated adjusted net earnings of $3.8 million ($0.10 per common share) the previous year. Adjusted earnings per common share were up 120% and revenue was up 35% over the fourth quarter of 2005. EBITDA increased from $22.1 million in 2005 to $32.4 million. Adjusted EBITDA increased by 50% to $33.2 million.

For the year ended December 31, 2006 net earnings were $39.8 million ($0.98 per common share) compared with restated earnings of $41.5 million ($1.09 per common share) in 2005. Revenue increased 14% from $447.7 million in 2005 to $510.5 million in 2006. Same store RevPAR increased 10% (11% in local currency) and EBITDA rose 28% from $108.3 million to $138.1 million.

EBITDA margins for the full year grew 300 bps from 24% in 2005 to 27% in 2006. For the fourth quarter EBITDA margins grew 190 bps.

Mr. Simon Sherwood, Chief Executive Officer, said "The increase in EBITDA over the prior year period in all regions is particularly encouraging. With the exception of the newly acquired Asian portfolio, the results can be considered same store. The overall EBITDA growth of $10.3 million was driven primarily by $7.9 million of growth for owned hotels and $1.4 million for the trains and cruises portfolio."

Overall RevPAR growth was 15% in U.S. dollars (13% in local currency), driven equally by rate and occupancy.

The RevPAR growth was strongest in the Rest of the World region, which experienced 17% growth in U.S.dollars (19% in local currency), with Europe at 14% (6% in local currency) and the North America region at 8%.

Performance highlights by region, include:

Europe: Revenues were up 28% from $26.7 million in 2005 to $34.2 million in 2006. EBITDA increased $1.4 million or 81% to $3.1 million, with all properties in the region showing good revenue growth. Reid's Palace and the Hotel Cipriani produced particularly strong results, as did Le Manoir aux Quat'Saisons.

North America: EBITDA of owned hotels was $5.6 million, up $3.0 million on the 2005 result of $2.6 million. The Windsor Court Hotel experienced revenue growth of 24% in a quarter which saw all U.S. properties show revenue growth. El Encanto was closed during the fourth quarter.

Southern Africa: EBITDA in South Africa grew $0.6 million to $4.6 million in the quarter, primarily due to better earnings at the Mount Nelson Hotel. The Westcliff Hotel had another good quarter, showing 40% revenue growth.

South America: Revenues at the South American properties grew 26% to $12.3 million. EBITDA grew $1.5 million to $5.3 million, a 4% increase. The Copacabana Palace Hotel accounted for all the growth.

Asia Pacific: The Observatory and Lilianfels both showed good growth combined with a strong quarter for several of the former Pansea properties, particularly in Koh Samui and Bali. EBITDA for the region increased $1.5 million up to $2.8 million.

Hotel management and part-ownership interests: EBITDA was $5.6 million compared with $5.0 million in the year earlier period. Charleston Place and the hotels in Peru were largely responsible for the gains.

Restaurants: EBITDA was $4.1 million compared with $3.1 million in the same period last year. This was primarily due to the results of the '21' Club.

Tourist trains and river cruises: EBITDA was $5.8 million compared with $4.4 million in the prior year period. Improvements from the U.K. day trains and the Road to Mandalay are primarily responsible for this increase.

Key financial highlights:

The company has continued its strategy of refinancing core assets. The quarter included a $1.5 million write-off linked to the refinance of a number of the European and U.S. hotels. This refinancing resulted in an average reduction in the company's debt margins of 25 bps.

The company closed its U.K. defined benefit pension plan in 2006 and replaced it with a defined contribution plan. Costs associated with this restructure totaled $0.8 million. Of the company's 6000 employees fewer than 50 remain in defined benefit schemes.

In the fourth quarter the South African rand stabilized against the U.S. dollar, resulting in a non-cash gain of $0.9 million.

Mr. Paul White commented: "The tax rate was 34% in the fourth quarter and 25% for the year, net of one-time credits on recognition of certain deferred tax benefits. The company will be adopting FASB Interpretation no. 48 "Accounting for Uncertainty in Income Taxes" effective January 1, 2007 and expects to make an initial provision on adoption in the range of $27 million to $30 million.

Mr. Simon Sherwood reflected on 2006: "It has been a year of tremendous activity for the company. We undertook major refurbishment work in the year some of which had a material impact on the year's results, particularly at Reid's Palace in Madeira. We are already starting to see the benefit of this work both in results and forward bookings for 2007. In addition we completed refurbishment of another 120 rooms at the Grand Hotel Europe in St Petersburg, added meeting space and refurbished 36 suites at the Copacabana Palace in Rio de Janeiro, and made major improvements at several other hotels.

We have completed the acquisition of 7 hotels further expanding the Orient-Express Hotels portfolio and bringing extra earnings growth potential for the future. El Encanto, our hotel in Santa Barbara, is under refurbishment and will give us a very high quality property on the U.S. west coast. This combined with our stronger presence in Asia means we now have established a global platform that should facilitate our expansion over the next few years."

He added: "Our property development business continues to show great promise. At St Martin the Cupecoy condominiums are now coming out of the ground. In addition, of the 8 new large villas we have under construction on the French side of the island, we initially put 6 on the market and all have already sold pre-construction at prices ranging from $5 million to $7 million each. We are also starting development of our land in Maroma, on the Mayan Riviera in Mexico where construction of the first model villa (of 27 planned) should start shortly."

Restatement of 2005 earnings

Management has re-evaluated certain deferred tax and foreign currency transaction misstatements identified in prior years in connection with the company's adoption of SAB 108 "Considering the Effect of Prior Year Misstatements in Current Year Financial Statements" ("SAB 108") during the quarter ended December 31, 2006. During this process, management also identified additional deferred tax misstatements. While these misstatements do not affect the company's previously reported cash flows or EBITDA, management concluded that it is appropriate to restate the previously reported results for the year ended December 31, 2005 (please see schedules on page 11 and 12) and the quarters ended March 31, June 30 and September 30, 2006. This impact on the first 3 quarters was to credit net earnings by $628,000 ($0.02 per common share) which will be disclosed in the company's 10K, which it anticipates filing on March 1, 2007.

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 is a non-GAAP financial measure and does not have any standardized meaning prescribed by U.S. GAAP. It is, 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 be a meaningful indicator of operations and uses it as a measure to assess operating performance. Adjusted net earnings is also used by investors, analysts and lenders as a measure 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 February 27, 2007 at 11.00 AM (EST) which is accessible at 1-866-220-1452 (US toll free) or +44-1452-542300 (Standard International access). A re-play of the conference call will be available until 5.00pm (EST) Tuesday, March 6, 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 6612086. A re-play will also be available on the company's website: http://www.orient-expressinvestorinfo.com/.

ORIENT-EXPRESS HOTELS LTD Three Months ended December 31, 2006 SUMMARY OF OPERATING RESULTS Three months ended December 31 $'000 - except per share amount 2006 2005 Restated Revenue and earnings from unconsolidated companies Owned hotels - Europe 34,219 26,720 - North America 22,599 16,732 - Rest of World 36,900 28,361 Hotel management & part ownership interests 5,567 4,991 Restaurants 8,194 7,951 Trains & Cruises 19,469 16,532 Real Estate 11,606 1,206 Total (1) 138,554 102,493 Analysis of earnings Owned hotels - Europe 3,123 1,724 - North America 5,614 2,662 - Rest of World 12,691 9,158 Hotel management & part ownership interests 5,567 4,991 Restaurants 4,069 3,140 Trains & Cruises 5,787 4,371 Real Estate 2,758 981 Central overheads (7,256) (4,948) EBITDA 32,353 22,079 Depreciation & amortization (9,408) (9,039) Interest (12,048) (8,452) Foreign exchange 938 913 Earnings before tax 11,835 5,501 Tax (5,178) (961) Net earnings on common shares 6,657 4,540 Earnings per common share 0.16 0.12 42.16 39.38 Number of shares - millions

(1) Comprises earnings from unconsolidated companies of $4,469,000 (2005 -$3,820,000) and revenue of $134,085,000 (2005 - $98,673,000).

ORIENT-EXPRESS HOTELS LTD Three Months ended December 31, 2006 SUMMARY OF OPERATING INFORMATION FOR OWNED HOTELS Three months ended December 31 2006 2005 Average Daily Rate (in U.S. dollars) Europe 478 374 North America 348 296 Rest of World 277 293 Worldwide 343 318 Rooms Available (000's) Europe 72 70 North America 54 42 Rest of World 113 88 Worldwide 239 200 Rooms Sold (000's) Europe 36 36 North America 35 28 Rest of World 76 55 Worldwide 147 119 RevPAR (in U.S. dollars) Europe 236 190 North America 223 199 Rest of World 187 182 Worldwide 210 189 Change % Same Store RevPAR Dollar Local (in U.S. dollars) currency Europe 200 175 14% 6% North America 310 287 8% 8% Rest of World 213 182 17% 19% Worldwide 218 190 15% 13% Twelve Months ended December 31, 2006 SUMMARY OF OPERATING RESULTS Twelve months ended December 31 $'000 - except per share amount 2006 2005 Restated Revenue and earnings from unconsolidated companies Owned hotels - Europe 180,365 161,188 - North America 85,492 79,706 - Rest of World 115,419 95,516 Hotel management & part ownership interests 19,932 17,485 Restaurants 22,821 22,522 Trains & Cruises 70,342 66,533 Real Estate 16,144 4,705 Total (1) 510,515 447,655 Analysis of earnings Owned hotels - Europe 52,708 46,560 - North America 19,652 15,686 - Rest of World 33,033 23,381 Hotel management & part ownership interests 19,932 17,485 Restaurants 6,530 5,625 Trains & Cruises 18,316 15,396 Real Estate 3,514 3,078 Central overheads (22,209) (18,955) Gain on sale of investment 6,619 - EBITDA 138,095 108,256 Depreciation & amortization (35,676) (34,087) Interest (44,510) (30,153) Foreign exchange (4,610) 5,065 Earnings before tax 53,299 49,081 Tax (13,532) (7,542) Net earnings on common shares 39,767 41,539 Earnings per common share 0.98 1.09 40.69 38.21 Number of shares - millions

(1) Comprises earnings from unconsolidated companies of $17,711,000 (2005 -$14,508,000) and revenue of $492,804,000 (2005 - $433,147,000).

ORIENT-EXPRESS HOTELS LTD Twelve months ended December 31, 2006 SUMMARY OF OPERATING INFORMATION FOR OWNED HOTELS Twelve months ended December 31 2006 2005 Average Daily Rate (in U.S. dollars) Europe 584 526 North America 325 323 Rest of World 271 277 Worldwide 382 375 Rooms Available (000's) Europe 298 301 North America 212 207 Rest of World 382 336 Worldwide 892 844 Rooms Sold (000's) Europe 175 176 North America 148 140 Rest of World 242 196 Worldwide 565 512 RevPAR (in U.S. dollars) Europe 342 307 North America 227 219 Rest of World 172 162 Worldwide 242 228 Change % Same Store RevPAR Dollar Local (in U.S. dollars) currency Europe 357 327 9% 9% North America 317 291 9% 9% Rest of World 182 162 12% 15% Worldwide 262 238 10% 11% ORIENT-EXPRESS HOTELS LTD CONSOLIDATED AND CONDENSED BALANCE SHEETS December 31 December 31 $'000 2006 2005 Restated Assets Cash $ 79,318 $ 38,397 Accounts receivable 74,327 59,061 Due from related parties 19,939 17,549 Prepaid expenses and other 9,485 13,061 Inventories 35,789 29,636 Real estate assets 35,821 12,149 Total current assets 254,679 169,853 Property, plant & equipment, net book value 1,183,400 1,017,175 Investments 130,124 129,681 Goodwill 121,651 94,390 Other intangible assets 20,149 7,100 Other assets 41,660 33,967 $1,751,663 $1,452,166 Liabilities and Shareholders' Equity Working capital facilities $ 46,590 $ 47,108 Accounts payable 26,227 22,680 Due to related parties 1,249 7,374 Accrued liabilities 55,916 43,545 Deferred revenue 25,501 19,339 Current portion of long-term debt and capital 83,397 72,151 leases Total current liabilities 238,880 212,197 Long-term debt and obligations under capital 586,300 496,156 leases Deferred income taxes 106,598 89,164 Other liabilities 11,007 - Minority interest 1,882 4,153 Shareholders' equity 806,996 650,496 $1,751,663 $1,452,166 ORIENT-EXPRESS HOTELS LTD RESTATEMENT OF CONSOLIDATED AND CONDENSED 2005 BALANCE SHEET December 31 December December 2005 31, 2005 31 2005 $'000 Restated Restatement As previously Reported Assets Cash $ 38,397 $ 38,397 Accounts receivable 59,061 59,061 Due from related parties 17,549 17,549 Prepaid expenses and other 13,061 13,061 Inventories 29,636 29,636 Real estate assets 12,149 12,149 Total current assets 169,853 169,853 Property, plant & equipment, net book value 1,017,175 1,017,175 Investments 129,681 129,681 Goodwill 94,390 38,623 55,767 Other intangible assets 7,100 7,100 Other assets 33,967 (2,019) 35,986 $1,452,166 $36,604 $1,415,562 Liabilities and Shareholders' Equity Working capital facilities $ 47,108 $ 47,108 Accounts payable 22,680 22,680 Due to related parties 7,374 7,374 Accrued liabilities 43,545 43,545 Deferred revenue 19,339 19,339 Current portion of long-term debt and 72,151 72,151 capital leases Total current liabilities 212,197 212,197 Long-term debt and obligations under 496,156 496,156 capital leases Deferred income taxes 89,164 59,508 29,656 Other liabilities - - Minority interest 4,153 4,153 Shareholders' equity 650,496 (22,904) 673,400 $1,452,166 $36,604 $1,415,562

The restatement column shows the impact on goodwill, deferred taxes and shareholders equity of the recognition of deferred taxes on purchase accounting for historic acquisitions.

ORIENT-EXPRESS HOTELS LTD Three and Twelve Months ended December 31, 2005 RESTATEMENT OF SUMMARY OF OPERATING RESULTS Three months ended December 31 $'000 - except per share amount 2005 2005 Restated As previously Reported $5,501 $5,501 Earnings before tax Tax 961 1,151 Net earnings on common shares $4,540 $4,350 Earnings per common share 0.12 0.11 39.38 39.38 Number of shares - millions Twelve months ended December 31 $'000 - except per share amount 2005 2005 Restated As previously Reported $49,081 $49,081 Earnings before tax Tax 7,542 8,348 Net earnings on common shares $41,539 $40,733 Earnings per common share 1.09 1.07 38.21 38.21 Number of shares - millions