Orient-Express Hotels Reports Second Quarter 2008 Net Income of $19.4 million vs $19.7 million in Previous Year; RevPAR up 16% / August 2008

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Orient-Express Hotels Reports Second Quarter 2008 Net Income of
$19.4 million vs $19.7 million in Previous Year; RevPAR up 16%

Second Quarter 2008 highlights

    - Second quarter total revenues of $188.6 million, up 14% over prior year
    - Same store RevPAR up 16% in U.S. dollars, 10% in local currency
    - EBITDA of US$52.0 million, up 4% over prior year
    - Second quarter net earnings from continuing operations of $21.7 million, up 7% over prior year
    - EPS from continuing operations of $0.51 per common share. Adjusted EPS of US$0.49 per common share

First Half 2008 highlights

    - Half year total revenues of $308.6 million, up 17% over prior year
    - Same store RevPAR up 15% in U.S. dollars, 11% in local currency
    - Half year EBITDA of US$68.4 million up 5% over prior year
    - Half year net earnings from continuing operations of US$19.3 million, up 9% over prior year
    - EPS from continuing operations of $0.46 per common share. Adjusted EPS of US$0.40 per common share

HAMILTON, Bermuda, August 4, 2008 - Orient-Express Hotels Ltd. (NYSE: OEH, http://www.orient-express.com), owners or part-owners and managers of 51 luxury hotels, restaurants, tourist trains and river cruise properties operating in 25 countries, today announced its results for the second quarter and first half of 2008.

For the second quarter, the Company reported net earnings of US$19.5 million (US$0.46 per common share) on revenue of $188.6 million, compared with net earnings of US$19.7 million ($0.46 per common share) on revenue of US$165.1 million in the second quarter of 2007. The net earnings from continuing operations for the period were US$21.7 million ($0.51 per common share), compared with net earnings of $20.2 million ($0.47 per common share) in the second quarter of 2007. The adjusted net earnings from continuing operations for the period were US$20.9 million ($0.49 per common share), compared with adjusted net earnings of US$20.3 million ($0.48 per common share) in the second quarter of 2007.

For the first half of 2008, the Company reported net earnings of US$15.1 million (US$0.36 per common share) on revenue of US$308.6 million, compared with net earnings of US$16.0 million (US$0.38 per common share) on revenue of US$262.7 million in the first half of 2007. The net earnings from continuing operations for the period were US$19.3 million (US$0.46 per common share), compared with net earnings of US$17.7 million (US$0.42 per common share) in the first half of 2007. The adjusted net earnings from continuing operations for the period were US$17.0 million (US$0.40 per common share), compared with adjusted net earnings of US$17.9 million (US$0.42 per common share) in the first half of 2007.

"Overall, despite challenging worldwide macro-economic conditions, we are pleased to deliver another solid quarter", said Paul White, President and Chief Executive Officer. "Revenues have essentially grown as expected, with local currency RevPAR growth continuing in line with forecasts. In the quarter, on a same store basis the Company held EBITDA margins to 30%. We continue to execute our long-term strategy and have achieved several significant milestones."

Business Highlights

Revenue was up 14% over the second quarter of 2007, reflecting Owned Hotels same store RevPAR growth of 16% in US dollars (10% in local currency), and a 16% increase in revenues from Trains and Cruises.

Revenue from Owned Hotels for the second quarter was US$140.2 million, up 12% over the same period in 2007. Revenues in all geographic areas contributed to the growth, with Rest of World leading the way with 19% growth. The quarter includes revenues of US$1.5 million in 2008 from Hotel das Cataratas, which was acquired in October 2007. On a same store basis, RevPAR growth in Rest of World was 14%.

In Europe the Grand Hotel Europe, La Residencia and Le Manoir aux Quat' Saisons showed strong revenue growth (all above 10%), while revenues in Italy were flat. Hotel Caruso was negatively impacted by the garbage crisis in Naples. Elsewhere, the Windsor Court and Inn at Perry Cabin in North America saw revenues grow 9% and 19% respectively. Revenues at the Copacabana Palace grew 21%, and revenues in Asian hotels grew 27%.

Revenues from Trains and Cruises increased by 16% and included a strong performance by the Venice Simplon-Orient-Express, which had revenue growth of 19%.

EBITDA before Real Estate grew 5% from US$49.9 million to US$52.5 million. Same store RevPAR growth of Owned Hotels was up 16% in U.S. dollars (10% in local currency).

Regional Performance

Europe: For the second quarter, revenues from Owned Hotels were up 11% year-over-year from $77.0 million to US$85.7 million. EBITDA was $34.2 million in 2008 versus US$31.8 million in the prior year. Same store RevPAR increased by 19% in U.S dollars, from US$406 to US$483, and by 10% in local currency. The primary driver behind the increase in EBITDA was the Grand Hotel Europe (up US$3.2 million), which continued to benefit from strong local market conditions. As expected, the European hotels were impacted by softer outbound business from the USA and the UK in the shoulder season.
North America: Revenue increased by 8% to US$23.7 million compared with the second quarter of 2007, and EBITDA was level at US$3.3 million. Same store RevPAR for the region increased by 7%. The properties in the region held their ground despite softer market conditions. However, EBITDA for the region was impacted by La Samanna, which was down $0.6 million, mainly because the hotel's Euro cost base eroded its margin on dollar income.
Southern Africa: Revenue was level at US$8.2 million compared with 2007, and EBITDA was down US$0.7 million. The second quarter is the low season for this region, which benefited last year from higher on-site spending by government groups.
South America: Revenue increased to US$12.6 million from US$9.2 million in the second quarter of 2007. The quarter includes revenues of US$1.5 million in 2008 from Hotel das Cataratas, which was acquired in October 2007. EBITDA was US$1.1 million, down from US$2.2 million last year. The quarter includes an EBITDA loss of US$1.6 million at Hotel das Cataratas. Same store RevPAR for the region decreased by 2% from US$195 to US$191. While the Copacabana Palace delivered a solid result, the region's EBITDA was impacted by Hotel das Cataratas, which is, as expected, loss making during its renovation program commenced in April 2008, and will continue to be loss making until the renovation of 200 rooms, including 13 suites and a spa, is completed in September 2009. The hotel will remain open throughout.
Asia Pacific: Revenue for the second quarter increased by 20% to US$10 million compared with the second quarter of 2007. EBITDA increased from US$1.0 million to US$1.3 million. Same store RevPAR for the region increased by 31% from US$122 to US$160 (19% in local currency). The Asian hotels results continued to improve following their acquisition in 2006, except for The Governor's Residence in Burma, which was impacted year-on-year by the recent events in that country.

Hotel management and part-ownership interests: EBITDA for the second quarter was $7.7 million compared with $7.0 million last year. The improvement in performance was evenly spread among the Company's management and part-ownership interests.

Restaurants: Revenue from restaurants in the second quarter was $5.3 million compared with $5.6 million last year, and EBITDA was $0.9 million compared with $1.3 million last year. The '21' Club was impacted by reduced volumes in its banqueting operations.

Trains and Cruises: Revenue increased by 16% to $30.9 million compared with the second quarter in 2007, and EBITDA increased by 13% to $9.8 million. There were strong performances in particular from the Venice Simplon-Orient-Express (EBITDA up $0.7 million) and from PeruRail (Company's share of earnings up $0.8 million).

Central costs: In the second quarter, central costs were $7.2 million compared with $7.3 million in the second quarter of 2007.

Real Estate: In the second quarter, there was an EBITDA loss of $0.5 million. For Cupecoy Yacht Club (renamed Porto Cupecoy), sales and costs continue to be recorded on the percentage-of-completion basis. As anticipated, there were no recorded sales during the quarter at any of the Company's residential developments.

Interest: The interest charge for the quarter was $11.5 million compared with $12.9 million in the first quarter of 2008 and $10.9 million in the second quarter of 2007. The reduction over the prior quarter is mainly due to the change in the fair value of an interest rate swap.

Tax: The tax charge reported by the Company for the quarter was US$11.2 million compared with a tax charge of US$10.1 million in the prior year. The tax charge reported by the Company for the six months ended June 30, 2008 was US$8.8 million compared with a tax charge of $8.6 million in the first six months of 2007. The Company's effective tax rate for the six months ended June 30, 2008, including earnings from consolidated and unconsolidated operations but excluding discontinued operations was 31.2% compared with 32.6% for the same period in 2007.

Discontinued Operations: The charge in the second quarter was US$2.3 million. This represents trading losses and maintenance capital expenditure at the Bora Bora Lagoon Resort, French Polynesia, which is being marketed for sale by Jones Lang LaSalle.

Investment: Total capital expenditure in the second quarter was US$29.4 million, which included various projects at, in particular, El Encanto, Grand Hotel Europe and Hotel das Cataratas. A total of US$15.1 million was invested during the quarter in the Company's developments at Porto Cupecoy and the Villas at La Samanna.

Balance Sheet: At June 30, 2008, the Company's total debt was US$835.2 million, working capital facilities were US$64.5 and cash balances amounted to US$73.3 million, giving a total net debt of US$826.4 million compared with total net debt of US$817.1 million at the end of the first quarter of 2008.

At June 30, 2008, debt was approximately 42% fixed and 58% floating. The weighted average maturity of the debt was 3.9 years and the weighted average interest rate (including margin) was 5.54%. The Company had cash and funds available under revolving credit facilities totaling US$118.7 million.

Outlook

"Looking to the second half of 2008, we expect to see some margin compression," continued Mr. White. "This pressure is being driven primarily by the impact of inflation, including rising worldwide food and fuel prices. Our client base has traditionally shown resilience throughout economic cycles. We must continue to sharply focus our resources on providing them the highest levels of service. We are holding fast to our operating philosophies, which are key to generating and maintaining customer loyalty in the unique niche in which Orient-Express Hotels operates."

Reconciliation to reported earnings

$'000 - except per share amounts Three months ended Six months
June 30 ended

                                                                   June 30
                                            2008        2007     2008    2007
                                          52,008      49,893   68,425 65,066

    EBITDA
    Adjusted items:
    Hotel das Cataratas (1)                1,574           -    1,655       -
    Management restructuring and               -         872        -     872
    related costs (2)
    Adjusted EBITDA                       53,582      50,765   70,080 65,938
                                          19,464      19,703   15,126 16,022

    US GAAP reported net earnings
    Discontinued operations net of tax     2,257         538    4,220   1,723
    Net earnings from continuing          21,721      20,241   19,346 17,745
    operations
    Adjusted items net of tax:
    Hotel das Cataratas (1)                1,079           -    1,152       -
    Management restructuring and               -         872        -     872
    related costs (2)
    Foreign exchange gain (3)             (1,894)       (797) (3,541)   (758)
    Adjusted net earnings from            20,906      20,316   16,957 17,859
    continuing operations
    Reported EPS                            0.46        0.46     0.36    0.38
    Reported EPS from continuing            0.51        0.47     0.46    0.42
    operations
    Adjusted EPS from continuing            0.49        0.48     0.40    0.42
    operations
    Number of shares (millions)            42.47       42.40    42.47   42.33

1. Result from Hotel das Cataratas, currently undergoing full refurbishment program and not yet operating as an Orient-Express Hotel.

2. The Company incurred costs in 2007 relating to the restructuring of senior management made up principally of executive recruitment fees and additional director, legal and other advisory fees.

3. Foreign exchange, net of tax, is a non-cash item arising on the translation of certain assets and liabilities denominated in currencies other than the reporting currency of the entity concerned.

*****

Management evaluates the operating performance of the company's segments on the basis of segment net earnings before interest, foreign currency, tax (including tax on unconsolidated companies), depreciation and amortization (EBITDA), and believes that EBITDA 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, adjusted net earnings from continuing operations, 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, adjusted net earnings from continuing operations, and adjusted E.P.S. to be meaningful indicators of operations and uses them as measures to assess operating performance because, when comparing current period performance with prior periods and with budgets, management does so after having adjusted for non-recurring items, foreign exchange (a non-cash item) and significant disposals of assets or investments, which could otherwise have a material effect on the comparability of the company's core operations. Adjusted net earnings, adjusted net earnings from continuing operations, and adjusted E.P.S. are also used by investors, analysts and lenders as measures of financial performance because, as adjusted in the foregoing manner, the measures provide a consistent basis on which the performance of the company can be assessed.

This news release and related oral presentations by management contain, 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, failure to realize hotel bookings and reservations and planned property development sales as actual revenue, inability to sustain price increases or to reduce costs, rising fuel costs adversely impacting customer travel and the company's operating costs, fluctuations in interest rates and currency values, uncertainty of negotiating and completing proposed capital expenditures and acquisitions, failure to complete binding agreements for the proposed joint venture with The Related Group or to pursue successfully the initial projects of that venture, 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, 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 LTD

Three Months ended June 30, 2008

SUMMARY OF OPERATING RESULTS

(Unaudited)

Three months ended

                                                          June 30
    $'000 - except per share amount                  2008        2007
    Revenue and earnings from unconsolidated
    companies
    Owned hotels
    - Europe                                           85,674      76,999
    - North America                                    23,720      21,986
    - Rest of World                                    30,840      25,809
    Hotel management & part ownership interests         7,736       7,029
    Restaurants                                         5,288       5,643
    Trains & Cruises                                   30,932      26,755
    Revenue and earnings from unconsolidated          184,190     164,221

    companies before Real Estate
    Real Estate                                         4,443         847
    Total (1)                                         188,633     165,068

    Analysis of earnings
    Owned hotels
    - Europe                                           34,190      31,778
    - North America                                     3,325       3,315
    - Rest of World                                     3,633       5,130
    Hotel management & part ownership interests         7,736       7,029
    Restaurants                                           920       1,288
    Trains & Cruises                                    9,826       8,712
    Central overheads                                  (7,159)     (7,335)
    EBITDA before Real Estate                          52,471      49,917
    Real Estate                                          (463)        (24)
    EBITDA                                             52,008      49,893
    Depreciation & amortization                       (10,282)     (9,757)
    Interest                                          (11,461)    (10,910)
    Foreign exchange                                    2,617       1,151
    Earnings before tax                                32,882      30,377
    Tax                                               (11,161)    (10,136)
    Net earnings from continuing operations            21,721      20,241
    Discontinued operations                            (2,257)       (538)
    Net earnings on common shares                      19,464      19,703
    Earnings per common share                            0.46        0.46
    Number of shares - millions                         42.47       42.40

(1) Comprises earnings from unconsolidated companies of $7,277,000 (2007 - $5,611,000) and revenue of $181,356,000 (2007 - $159,457,000).

ORIENT-EXPRESS HOTELS LTD

Three Months Ended June 30, 2008

SUMMARY OF OPERATING INFORMATION FOR OWNED HOTELS

                              Three months ended June
                                        30
                                 2008         2007
    Average Daily Rate

    (in U.S. dollars)
    Europe                            924          737
    North America                     365          356
    Rest of World                     264          234
    Worldwide                         525          461

    Rooms Available (000's)
    Europe                             91           91
    North America                      57           56
    Rest of World                     110           94
    Worldwide                         258          241

    Rooms Sold (000's)
    Europe                             56           61
    North America                      39           37
    Rest of World                      61           57
    Worldwide                         156          155

    RevPAR (in U.S. dollars)
    Europe                            566          495
    North America                     251          235
    Rest of World                     148          142
    Worldwide                         318          297

Change %
Same Store RevPAR Dollar Local

    (in U.S. dollars)                                           currency
    Europe                            483          406      19%      10%
    North America                     255          238       7%       7%
    Rest of World                     168          144      16%      14%
    Worldwide                         305          264      16%      10%

ORIENT-EXPRESS HOTELS LTD

Six Months ended June 30, 2008

SUMMARY OF OPERATING RESULTS

(Unaudited)

Six months ended

                                                          June 30
    $'000 - except per share amount                  2008        2007
    Revenue and earnings from unconsolidated
    companies
    Owned hotels
    - Europe                                          112,813      98,114
    - North America                                    50,390      45,124
    - Rest of World                                    71,607      58,697
    Hotel management & part ownership interests        12,954      11,676
    Restaurants                                        10,154      10,938
    Trains & Cruises                                   42,117      37,330
    Revenue and earnings from unconsolidated          300,035     261,879

    companies before Real Estate
    Real Estate                                         8,526         847
    Total (1)                                         308,561     262,726

    Analysis of earnings
    Owned hotels
    - Europe                                           30,446      28,223
    - North America                                    10,625       9,435
    - Rest of World                                    16,380      17,214
    Hotel management & part ownership interests        12,954      11,676
    Restaurants                                         1,569       2,156
    Trains & Cruises                                   11,369       9,860
    Central overheads                                 (13,958)    (13,016)
    EBITDA before Real Estate                          69,385      65,548
    Real Estate                                          (960)       (482)
    EBITDA                                             68,425      65,066
    Depreciation & amortization                       (20,566)    (18,532)
    Interest                                          (24,390)    (21,448)
    Foreign exchange                                    4,662       1,253
    Earnings before tax                                28,131      26,339
    Tax                                                (8,785)     (8,594)
    Net earnings from continuing operations            19,346      17,745
    Discontinued operations                            (4,220)     (1,723)
    Net earnings on common shares                      15,126      16,022
    Earnings per common share                            0.36        0.38
    Number of shares - millions                         42.47       42.33

(1) Comprises earnings from unconsolidated companies of $12,525,000 (2007 - $9,100,000) and revenue of $296,036,000 (2007 - $253,626,000).

ORIENT-EXPRESS HOTELS LTD

Six Months Ended June 30, 2008

SUMMARY OF OPERATING INFORMATION FOR OWNED HOTELS

                             Six months ended June 30
                                 2008         2007
    Average Daily Rate

    (in U.S. dollars)
    Europe                            772          639
    North America                     417          396
    Rest of World                     283          260
    Worldwide                         451          408

    Rooms Available (000's)
    Europe                            155          154
    North America                     114          112
    Rest of World                     233          198
    Worldwide                         502          464

    Rooms Sold (000's)
    Europe                             83           86
    North America                      77           73
    Rest of World                     144          128
    Worldwide                         304          287

    RevPAR (in U.S. dollars)
    Europe                            416          356
    North America                     282          257
    Rest of World                     174          168
    Worldwide                         273          252

Change %
Same Store RevPAR Dollar Local

    (in U.S. dollars)                                           Currency
    Europe                            360          298      21%      11%
    North America                     287          262      10%      10%
    Rest of World                     193          171      13%      11%
    Worldwide                         268          233      15%      11%

ORIENT-EXPESS HOTELS LTD

CONSOLIDATED AND CONDENSED BALANCE SHEETS

(Unaudited)

June 30 December 31

$'000 2008 2007

Assets

    Cash                                                  73,343      94,365
    Accounts receivable                                   82,179      62,847
    Due from related parties                              27,193      30,406
    Prepaid expenses                                      22,004      16,115
    Inventories                                           51,843      45,756
    Other assets held for sale                            58,431      54,417
    Real estate assets                                    47,096      57,157
    Total current assets                                 362,089     361,063

    Property, plant & equipment, net book value        1,365,745   1,273,956
    Investments                                          157,128     147,539
    Goodwill                                             138,356     133,497
    Other intangible assets                               21,679      21,660
    Other assets                                          53,558      50,722
                                                       2,098,555   1,988,437

Liabilities and Shareholders' Equity

    Working capital facilities                            64,504      64,419
    Accounts payable                                      35,978      30,132
    Due to related parties                                     -           -
    Accrued liabilities                                   71,867      62,246
    Deferred revenue                                      51,119      35,545
    Other liabilities held for sale                        5,313       5,619
    Current portion of long-term debt and capital        115,779     127,795
    leases
    Total current liabilities                            344,560     325,756

    Long-term debt and obligations under capital         719,406     658,615
    leases
    Deferred income taxes                                120,479     119,112
    Other liabilities                                     36,815      34,669
    Minority interest                                      2,022       1,754

Shareholders' equity 875,273 848,531
2,098,555 1,988,437

Contact:

Orient-Express Hotels
http://www.orient-expressinvestorinfo.com

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Also See:

Orient-Express Hotels Reports 2007 Full-year Net Earnings of $33.6 million, Down from $39.8 million Prior Year; Opening Hotels in Santa Barbara, New York City, Brazil, Bali, and Peru / February 2008