Orient-Express Hotels' Investor and Analyst Meeting - Conference Call (Transcript)

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Orient-Express Hotels Ltd. (OEH) Investor and Analyst Meeting Call May 3, 2013 11:00 AM ET


John Scott - President and CEO

Martin O’Grady - CFO


Joe Greff - JP Morgan

Chris Agnew - MKM Partners

Gautam Chand - Instanex Capital

Chris Jones - Telsey

John Scott

A warm, Orient-Express Hotels and 21 Club, welcome to you all. My name is John Scott, I’m the President and CEO and we’re thrilled to have you here today. I thank you for being here, somebody reminded today that Wall Street’s now been on shown on TV again which has the 21 Club prominently featured in there. So, maybe go back to the old days were greet is good but we’re excited to be here. You’re in the room, that has recently been renovated, great banquette space, great meeting space. I hope those of you how have annual events for both of your shareholders and investors will take the opportunity to come and utilize some of our facilities here.

I want to start by introducing some of my core team that are here with today. Martin O’Grady, Martin standup, wave your hands. Martin is our Chief Financial Officer. Filip; Filip is our Chief Operating Officer and Richard Levine is our Chief Legal Officer. So, they’re here today, Vicky is in the back runs our Public Relations and many of know very accounted Amy Brandt, over here in our Investor Relations. So, they’re all here.

This is a great opportunity for us to interact, great opportunity for us to present to you our direction, our direction, our EXPRESSway, our forward-looking strategy and what we intend to do. I do want to adjust from our process perspective, we’re going to do a presentation, Q&A probably in hour or hour an half, have an opportunity post Q&A to interact, have interacted with number of you already but on one-on-one basis we’ve an opportunity to interact and then I hope some of you will stay for the lovely 21 Club meal they prepared for us. So, that’s great.

Let’s get started, EXPRESSway. Where we’re going to go today? I’m going to talk a little bit about who we are. Many of you have met, many of you have been in Orient-Express for some period of time, some of you are new and I want to make sure that we start with context. Who we are? Little bit on where we’re coming from, what we’ve accomplished and what we’re seeing and then talk a little bit about where we’re headed with the primary focus on that and summary and the Q&A.

So, who are we? First I’ll start with Leadership Team. Obviously, the last 18 months without CEO here, I joined in November of last year, been in this field for six month but I also want to highlight something else. We have a very experienced core leadership team you’ve just met three of them. If you look at the core leadership team, we’ve got those who had been with the company for a long time that are critical to our legacy and our success, you also have a reasonably new set of people on your leadership team with myself with Ralph Aruzza who recently joined us and with Rich Levine who joined us from Kerzner. A little bit on me, those of you who have already met me and the way I described myself is a bit of hybrid within this industry and somebody with a strong core experience phase in operations having said that in my early in my career migrating onto the ownership side.

We’re known our operator here my experience base has been as an owner with private investment, direct investment, and properties like Four Seasons, Ritz-Carlton and others. And then finally as a leader and CEO running Rosewood Hotels, great success building a brand and that was ultimately sold for record pricing. So that who I am I also serve on the Cedar Fair Board, theme park Company, my kids love it. Dad’s on the board of Cedar Point and Knott's Berry Farm and others, it’s a great company that has had great success in the last three years since I’ve been on. So, a day like no other I wanted to start a picture tells more words than I can ever express. We can’t transport it to our property but what we can do is give you just a quick overview of who we’re and are we running or we’re live. Thank you.

We couldn’t take you to all those lovely places but Amy is on standby after the meeting and we’ll help you with your summer booking. There is some great hotels here; we hope you all have an opportunity to experience some of our Orient Express hotels.

So, what I am taking with when I look at that is that this business isn’t just about the hardwares, the great assets, the great physical assets we have, it’s also about the software which we often don’t talk about, this company has a great software. Our experiences are different from the chain like luxury out there because of the people that execute on a day-in-day-out basis. So let’s, here we are. Who we are?

We are diversified luxury portfolio comprised of 46 hotels, resorts, restaurants, trains, cruises and safaris; a unique owner/operator model of one-of-a-kind iconic portfolio of irreplaceable assets in many high-barriers-to-entry markets. We have a global footprint and a loyal affluent customer base. We will talk about some of these in a moment. We are focused on authentic, unique hospitality experiences which differentiates us from very strong competitors. We have an umbrella brand that supports extraordinarily strong individual brands.

And finally we have a core leadership team and a property leadership team with deep industry experience throughout the world. So, at a high level, hotels and restaurant, we have one free-standing restaurant, you are in it today, 33 hotels, three safari camps, one restaurant. On the other side; trains and cruises we described these as experiences, we have six trains, two cruise operations we have another one that will be joining us this summer that we'll talk about in a moment.

Unique owner operator, one of a kind of portfolio; these are at the heart of our company, the major drivers; we got the Copacabana down at Rio, Hotel Cipriani in Venice, Charleston Place, Hotel Splendido, Grand Hotel Europe, The Ritz, Madrid. Irreplaceable assets, difficult high barriers to entry marketplaces the list goes on and on and on. We have very strong assets; with very strong asset value in key markets.

How do we define where we operate? We are a global business footprint, concentrated in five key geographic clusters. A lot of the work I have done with my team is trying to re-focus where we are operating, and make sure we have the infrastructure around that but we are in North America, South America, Europe, Asia and Africa. We have focused our infrastructure around these, your eyes are probably as bad as mine, you won't be able to see the properties but you will see that these clusters represent areas where we have operating infrastructure and we have properties that work well amongst themselves.

Global business footprint with diverse customer base, I want to give a little bit of a high level, revenue by business; that’s Europe hotels represent a little over a third, North America represents 20%, the rest of the world roughly 25% and then trains and cruises at 15%. Guest origins, a third of our market really comes from Europe and 40% comes from North America. Reasonably diversified customer base and then probably most importantly, emerging markets; the balancer from the emerging markets; this is an area that is growing rapidly for us, not just us but a lot of the other luxury hotel companies, emerging markets represent a real opportunity for us. The bottom box just shows you where our properties are located and the mix accordingly.

We're an umbrella brand; we are a co-brand; we are a soft brand that architecture basically is we want to enable guests to connect the dots to these iconic properties that you see. Each of our properties have strong brand identity; new Orient-Express brand brings them together and enables guests to connect the dot and experience more than one of these great unique; one of a kind experiences.

More work to be done on this front, I think there is a great opportunity here and we will talk a little bit more about that. But our brand architecture is this; it is unique, it provides us with opportunities, it also provides us with some challenges that we are trying to work through.

Where are we coming from? I am not going to dwell on this but it is important to acknowledge where we are coming from, as we move forward, because it helps inform our strategy and it helps inform our direction.

First of all, organizational structuring, people ask me what did I find when I came in here, some of this is apparent in this slide. Lack of clarity around our central versus our regional functions increased cost and reduced efficiencies. Unless you are really clear about your organizational structures, it is really hard to execute and it creates inefficiencies in cost.

Opportunistic global acquisitions; this company I admired from afar for many-many years; extraordinarily successful in uncovering and acquiring truly interesting and one of the kind assets. I admired them; I wondered how they did it. But overtime you accumulate a portfolio and just as that happens overtime you realize which in that portfolio really worked and which in that portfolio doesn’t work, so I think the opportunistic acquisitions has resulted in a portfolio that overtime, there are some assets that are neither financial or strategic fit.

Capital allocation decisions, as I went around and met and talked with many of the investors as I have joined, a real concern around discipline, a real concern around capital allocation and distractions. We have very finite resources both in the capital front and in the management time and intensity. So getting capital allocation right is of critical importance; balance sheet over extension and liquidity challenges, no surprise, and our company like many in the luxury hospitality industry experienced extreme pain when you have high operating leverage and high financial leverage that certainly happened in 2009 and 2010.

Global economic reception severely impacted the company’s luxury asset portfolio; again not a surprise RevPAR and revenue decreased by 21% and our EBITDA decreased by 44%. I will tell you, I have been, as I go back in history and look at what the team was able to do their response to that crisis and their ability to control cost and control flow through both on the negative side; we always talked about it on the positive side when you got increasing revenues, how much are you retaining and flowing through, they did a very good job as it relates to the negative retention which is making sure you get as much variable cost and fixed cost out of the model when things go poorly.

It is where we are coming from. Somebody asked me to setup slides, talk a little bit about where you have been peak versus trough, this is it, global recession impacted us fairly dramatically going from a higher revenues of about 540, down to 427 in 2009. We have responded reasonably well from that. I think there is more opportunity that we will talk about in a moment.

EBITDA got hammered like most in within our industry, and as you look down on the bottom of the slide, well our declines are basically consistent with the luxury industry, where we have seen recovery has largely been on our rate. I think that’s also telling with this company we held our rate, leisure travelers, we did the right thing in terms of rate, not dropping it. It’s very hard to get that back. The opportunity here really lies with occupancy. We are not back on the occupancy front. I think that will present the real opportunity for us moving forward.

Where we coming from? 2012, more recent history but what I would call a transition year. There were a number of properties that were under renovation. One of our core drivers, the Copacabana Palace was under renovation, materially impacting our full year revenue and EBITDA generating opportunities. We also had headwinds which you’ve all heard in our earnings reports from both currency and Euro market challenges in the Madrid and the Mainland Italian hotels.

And then we talked a little bit about the balance sheet. Don’t need to go back there. We don’t tend to go back there, but our net debt peaked at about $848 million, almost 10 times, and debt maturities were also difficult to manage during that time. I think the team managed very well through that very difficult period, but that was obviously a crisis moment for the business.

Liquidity was under pressure and I will say people ask as they have gone around and visited the properties, what are the conditions of the asset, that’s on our balance, very good. But just as every luxury hotel owner and company, there was a period in which capital was being deployed in different ways, code word for saying owners making right decisions in a period of financial stress, you know didn’t always put the capital back into the properties, Orient Express experienced some of that, and a little bit of that is the snake with the elephant working, you know the elephant that’s been even working its way through the system.

So, I am pleased to say we’ve done a lot in last three years. The assets are in good position. But, there was liquidity that translated into some CapEx challenges.

So what have we accomplished? Again, I think it’s important to highlight some of the quick winds and some of the things we have accomplished. I think there is positive momentum to be built on that provides us with the platform for near-term growth. Strong recent operational performance and recovery of certain properties, 2012-13 successfully added 392 keys back into our inventory. We talk about growth but we just added 12% of our room inventory back into the business in the last year. That will take time to ramp up but we have just, in terms of growth, that’s like buying at a 100 rooms per hotel which tends to be the size of our properties, that's like adding three new hotels. We've refined the portfolio, we disciplined asset disposals in noncore properties, we talk a little bit about that in a moment, I think we've executed on that, in my short tenure we closed on two.

Improved balance sheet liquidity profile, my hats off to Martin and the team and the finance team, I think we feel very good or I wouldn't have taken this shot about where our balance sheet is, where our liquidity is and providing us with the flexibility to be able to grow moving forward.

Not going to go through all of these, we talked about these in the highlights in our earnings but we have had some successes with a number of our properties. I want to highlight a couple, the Hotel de Cataratas, that was a new hotel three years ago. Extraordinary, I just visited it, extraordinary renovation of a rundown government hotel; you saw it with the waterfalls, spectacular Iguassu waterfalls, that hotel last year generated an incremental $2.6 million of EBITDA. There's more opportunity today, we're in the process of trying to renegotiate our lease there which would result in some very, very good incremental EBITDAs for us.

Our Sicily Hotels, again a product that was added a few years, last year generated roughly 25% RevPAR increase, 50% from where they started. Demonstrating to this company, if you invest in the right assets and do the right things there's great upside opportunity. It may not happen first year. We'll talk about that in a minute.

Opportunity is really with your children, with your new children, when you open a property that is just the first step that is a first step in a journey of trying to deliver on the potential for that assets, so Sicily is starting to hit on all cylinders. Charleston Place a large producer in Charleston continues to have record performance. And then you know at a very high level, Myanmar, I keep wanting to call that Burma. Myanmar, operations benefiting from a great resurgence of travel into unique locations and destinations, so a lot of good things happening in the last year, that we've talked about and highlighted.

Don't just talk about financial results without talking about how we've executed from a product level. Yes it actually translated better financial results, but let's talk about what this team has accomplished as it relates to a product front. So we're a luxury in our market set, so how do we measure ourselves, in our market sets, where we compete, our RevPAR index of our portfolio is a 116% of our competitors. We compete against the best of the best.

Four Seasons are in some of these comp sets with Carlton's, Mandarins, are all within some of our comp sets and we achieve a 116% of our local competitive market set. Again, largely driven by rate but there is occupancy opportunity in that as well. Latest leading quality assurance also how do we measure our product execution, our LQA scores, our mystery shoppers the group that we use to measure us and hold us accountable at 89% I would tell you from my days in Rosewood, that is a very strong result, Orient-Express is head of where we were and we are second in the top 14, top luxury hotel operators. And again that includes people like Fairmont, Raffles, Dorchester, Rocco Forte. So, we’re executing, we’re executing on a product delivery perspective. And then we always level when the properties get recognized within the industry, seven of ours are Condé Nast Traveler gold list, five of Condé Nast Traveler leader choice awards, nine hotels Travel and Leisure top 500.

I met with the Nancy Novogrod yesterday on Travel and Leisure, they’ve very good do as far away and by the way this translates into bookings. Two of our new hotels, I’m not really sure I would say the El Encanto and Palacio Nazarenas have been rated the top 8 hotels and they’ll be featured in the next edition of Travel and Leisure.

This stuff is all great when you get it and it does translate into bookings. So, again we talked about other new keys that we added back in. We opened the new hotel, El Encanto that product is ramping up nicely but again, this is just a first stage, Palacio Nazarenas also opened last year. Both of those hotels have not reached their economic potential. Splendido added five new keys. I’m particularly impressed with the opportunity to add incremental rooms to our properties. This is real estate, if we got unutilized assets where we can actually add incremental keys or suites in a creative manner. We leverage all the cost that we have at our existing properties.

So, as you look at this, it’s not just an operating business it’s a real estate business and as you turn over stones there is opportunity to incrementally add value at each of our properties, recent assets sales refined the portfolio and provided liquidity for strategic reinvestments.

I’m reminded to remind you all we don’t shrink our way to greatness. We take this very seriously, this is not just about desperation, this is about refining our portfolio that has been again accumulated over the years, reasonably opportunistically but there is opportunities to drill down and figure out would your assets work and there is opportunity to recycle capital and that will continue albeit not on a grand scale.

The assets sales increased cash flow have allowed management to internally finance attractive property, investment in addition to debt amortization. So, almost a $120 million over the last period has been done the last two The Westcliff and the Porto Cupecoy, both of those were done in the period which I’ve joined since November and its provided us with a strong liquidly position.

Steady progress is made on our balance sheet and our leverage profile, near term target of four times. Martin reminds me that I think in 2000, we set a target previously would be down around five and 2011, we’re below that, we've achieve that target. I think we will continue to work on that both through scheduled amortization or increased EBITDA and periodically through pay downs on some of the leverage that we have but we’d like to get that at a level around four. I think we’ll be there in the near-term.

You can’t talk about debt without talking about maturities, I looked at this company seven or eight years ago and the debt maturity profile was much different then. In the next, in 2013, we’ve very manageable maturities all of which has received bank credit approval and we’re also engaged and beginning to work on our 2014 maturities. We don’t expect that to be a challenge.

So what are we seeing? I want to talk at very high level about some trends I spoke with a few of you here before we started the presentation let’s talk a very high level about what we’re seeing. On the positives, limited supply growth due to scarce financing and high development costs, it is hard to vision new luxury hotels economics working in key gateway cities without in the past levering of residential product in otherwise.

I think that will continue. We’re going to benefit from that in particularly on the luxury front it is extraordinarily difficult to execute a development. There are some pockets where it’s happening, New York being one of them. But in general the luxury supply additions are going to work; it will be very limited and will favor us as we move forward.

Continued recovery and growth in North America and Asia, we’re seeing that and we’re feeling that. In fact it was an article on the Wall Street Journal the other day that was talking about outbound travel of Americans who are now benefiting from a positive currency but also that market is our core market, it presents over a third of our business remains strong.

Asia is also a strong market and it is growing and some of the emerging markets are growing for us as well. I talked about that in the emerging markets; the emerging market is quite interesting. I talked with Frits at Starwood and his experience is very similar to ours. Extraordinary growth in these emerging markets at the property particularly from places China and India, we too have felt that in terms of 20% to 30% growth and albeit this is a very small number.

The emerging markets are growing very quickly and early in my career I worked in Asia that the Japanese who were going to take over the world in early 80s and were beginning the travel migration; it’s happening much quicker now. From China and India, those are early adaptors, are going to move or what I would say exotic destinations; whereas Japanese in the early days were going to be more safe destinations, Hawaii and alike. So this has happened very rapidly and we are feeling it. It’s also interesting to see that the spend that we are getting from those emerging market is anywhere from $50 to $100 higher than the spend we get from our core markets. That’s a nice trend. Again these are small numbers but it’s positive.

On the challenges front; there is no hiding from it, you know there is continued macro headwinds, softness in the UK; I have been talking with the couple of investors prior part of the presentation. You know the UK business has been soft for us, as day trains business are (inaudible) that has been softer. The UK nearly averted a triple dip recession but it’s tale of two cities, it’s a tale of London and the tale of everything else. We still face some more headwinds on that front and the rest of Europe, look Spain continues to be milder in some challenges that we all are aware of.

Continued short booking windows provides limited visibility. That will change when we start seeing occupancy, as getting to a point where people are going to realize that they have to make their bookings earlier. But we are still seeing short and because our business base is leisure and you don’t have as much group, you will see with us visibility is even more challenged.

Continued softness in group business; I think this is changing but I think as I listen to the earnings report from most of the other hospitality companies, this has been a soft spot, soft spot for us both because of the macro trends but also because I think there is opportunity for us to enhance that side of our business.

So where are we headed? I love this picture. I love the band safari with them because I feel like we are on a bit of safari in a journey together. This is one of our Botswana safaris and I have not been to that one and I encourage those of you who are looking for a great summer experience to try this one.

EXPRESSway, I found as joined company, it is extraordinarily important to have the management team focused on key priorities and a strategy and ours has been defined as an EXPRESSway, it’s a way for us to develop a framework and to make sure we stay on message as a team and stay on point and strategy. We have a limited finite amount of resources, we are going to dedicate those to where we see we can find the best near-term and medium-term growth opportunities and that’s what EXPRESSway is.

So our framework; EXPRESSway is our strategy that provides frameworks for near-term and medium term priorities. We are going to focus on the box here and of course I would love to focus on transform the core transformational type of things but I will tell you as I highlight this that there is huge value and opportunity as I tell the team, and as I have told many of you in the near to medium term, in the box here that we have which is really twofold. One; improve the core, we need to do better with what we have, we need to free up time and free up capital and make sure that we are optimizing what we have. I think there is huge growth potential in what we have. To that end, we are talking about our organizational structure which I'll highlight. We're talking about enhancing revenue generating opportunities with the addition of Ralph Aruzza. We are keenly focused on and continuing to optimize our portfolio in recycling capital. We have great opportunities to re-invest that capital.

So improve the core; extend the core; I am a firm believer that you have to earn the right to do transformational type growth. We have great opportunity to take what we have as our core, as I got in there from a real estate background, we were just talking about the incremental keys, you can add and those sorts of things because I open that bag; that bag that contains all these great assets that Orient-Express has. There is a great opportunity for us to extend our core and leverage on what I call close adjacencies. Those places that the risk profile is low and the return profile is high; we can make incremental investment to generate, attractive returns for us without distracting the limited resources both in capital and management team that we have.

So, realize the economic depth and part of that is executing on the ones that we just added. We have a responsibility to deliver on those ramp-ups of those properties we have added, we can invest in select existing portfolios with attractive ROIs. We'll talk a little bit about process on that front and invest in a select new product additions and expansions. We'll talk a little bit about that.

Point here; all roads lead to optionality, all roads position us, will take us to a position of strength that which you can consider more transformative opportunities. So, most of this has been highlighted in our earnings. Can't move forward until we know we have got the right team, got a real team that has been here; complimenting that great team with some new additions? I am very pleased we have been able to attract; which also tells you something. The thing amazed me most prior to Rosewood was the ability to attract into our company some of the best and the brightest, we've done that. With Ralph Aruzza on sales and marketing, we have just hired a new VP of global human resources who's going to be joining us. This company is operative without an HR person for a great deal of time. One of our key assets that we don't talk enough about is our people. That will enable us to execute that at a property level but it will also enable us to coordinate, find efficiencies and those sorts of things. So, the HR function is critical.

Our Vice President of Technical Services, he has been with the company for 22 years great, Roger Collins, has done a great job, I am bringing part of the team back together Katherine Blaisdell was from Rosewood. I followed her career she was with team leaders and others we have got some really important capital projects. We have got to have the right person there to help us execute on that from a budget and a execution. And then finally, an internal promotion of accounting and control margin in the finance team are strong; we are building a layer of succession and making sure that we have the right people in the right places and that has been a great success. I will note that all these possessions are not incremental, these possessions were part of the existing framework and are critical to us being able to deliver on what you are about to see.

So optimizing the organization to drive and enhance the operation effectiveness and cost efficiencies. I was reminded it as I have met with many of you investors of a view that they central overhead, how do you think about that other opportunities? I will say there are opportunities and we are putting a stake in the ground I have challenged my team, I have challenged myself to find some overhead cost savings. It is not the Holy Grail it is a fine balance between staying on that edge of investing in the right and having the right cost in the right place that has generate to return but also making sure that you do not, if they are things that we are doing and we do not need to be doing, let’s get rid of them.

But there are opportunities there consolidating central functions, we've talked about; closing a Singapore development and consolidating it in London that has benefit beyond cost that has benefits in term of focus and execution; sales and marketing person within New York. We now have that person directly sitting with the team, our large team of sales and marketing professionals in London; a great benefit to us.

And then the New York office we carry very nice New York office. We are looking at that we have hired a broker to evaluate our options on that office. The things around the edges that we can do; these are important there is a lot of stickiness in overhead optimization but the reality is I think we will start seeing them in the next 12 to 24 months and we have set an internal target to try and achieve some of those.

The revenue enhancement; Ralph Aruzza will be on board. I hope to bring him is on board and transitioning well. I want to talk about big themes here and less about the nitty-gritty details, but I want to talk about the big themes where we have opportunities. We have talked on the one slide of occupancy opportunities. It really comes from a number of different areas. So one theme; we are focused very hard on, how do we penetrate more deeply our existing markets, how do we leverage the large royal customer base with deeper engagement.

If I can get one guest for The Cipriani to either stay at The Cipriani one more time or to crossover and stay at The Splendido with (inaudible) that is huge incremental benefit to us. It's untapped; guests today have a hard time connecting the dots, great opportunity for us. We are going to roll out a new intuitive Orient-Express.com website that has been rolled out. It has got better adapted designing and functionality is better, and it’s a better booking engine. This is blocking and tackling but it is powerful.

We’re reengineering our CRM process, our customer relationship management process. This is a journey. People who love to meet, or turn on a loyalty program tomorrow, it doesn’t happen that way. We got about a million people in our dedicated profiles and people that are engaged with us directly. We are trying to figure out better ways to communicate with them, to recognize them and to reward them for loyalty. There is an objective there to ultimately execute on that model.

Whereas, we have a new OEH traveler mobile app. It’s pretty sexy. I think it rolls out in the store, the Ice Store next week, great content, a way for us to engage directly with our guests, and ultimately this will be a way to connect the relative book. I think it was the Facebook, just came out in their earnings release and said; roughly a third of their revenue growth was all in the mobile app. This is a great opportunity for us to engage with our guest and provide EGC booking opportunities.

Enhanced revenue management; not just about occupancy, it’s also about revenue management, having the right team, systems and processes in place. I think we have the right team. I think we are working on the right systems and the right processes. Ultimately revenue management is a science. We have got a great guy leading that. And it’s about driving that knowledge base both in the systems down into the property levels and I think we are making great progress on that front.

And then finally new business segments; in addition to penetrating our core, we need to make sure we strengthen our new business segments. There I think we have a strong and Ralph believes we have a strong opportunity in the MICE, you know that’s not the little things we have got running around on the street these days. The MICE business meeting center planners is a great opportunity. Rosewood executed on that very well. Our properties are set up very well for that.

And there are certain tangible ways that we can go after that business. It is the right kind of group business. We are not a conventional conference center other than the Charleston Place. We are a property that works very well with celebrations. That’s a great trend that we are exploring; family reunions, weddings, all those sorts of things and the MICE thing, center of business. But there is a science to how you get that business, and that’s something that we are working on.

And then targeting emerging markets; one of our bankers is from Hong Kong and he went online and checked at our new website that is in Chinese language. We are focused on those market place both with resources and booking capabilities. So those are going to continue to grow of course.

This slide is meant to be illustrative. I used it with my team to focus on the opportunity. It is a very high level way to look at opportunities. As I talk and then Ralph talks to our team every occupancy point increase across the Orient Express portfolio generates approximately $8 million of incremental revenue and at a 40% flow through which we can debate all day long. We've traditionally seen 50; we generate another $3 million of EBITDA.

So if, again this is an increasingly focusing topic with the team. If we can get our occupancies levels back to where they were pre-crash and we believe that there is the ability to do that with Ralph, back to a mid-60 occupancy level, we generate roughly $50 million of incremental revenue and almost $20 million of incremental EBITDA. That message is incredibly powerful internally, and focuses our attention on what we're doing. So, refining the adjusting portfolio, not going to spend a lot of time on this other than, I think as I went around and met a number of you, we talked a little bit about this.

We talked about the, my framework for looking at this, I got in, we developed a what I would say more quantitative and robust way to look at our properties and I really defined that in really three key areas, the properties will fall into that. We look both from a strategic and a financial perspective. Strategic being where do have resources infrastructure in our guest space, and financial, getting better, do these things have opportunities for increased EBITDA are we generating good ROI, it’s a long metrics and a long list of criteria, ultimately it helps inform our decision, really it's all about a framework that helps us inform our decisions about what we do on this front. We have our core performers and financial stars, those properties that have great financial performance, limited future CapEx and fit well strategically within our portfolio, I'm glad to say a bulk of our properties fit into that box.

Our properties, we have properties to incubate and improve, there's a lot of, a number of our properties have not recovered back to the pre-cash level, or haven’t recently had cap ex put into them, or have attractive CapEx revenue in EBITDA generating opportunities. Those who are going to incubate and improve, that helps the team focus on where we go. And then finally properties that consider for strategic options. Codeword for, there are some that fit, that we will continue to look at, we'll target, we've targeted the sub 2-3 noncore assets, yes we have an idea of which they are, no we have not made an announcement on what that will be, but we believe that could generate between $50 million to $70 million of proceeds over the next 18 to 24 months which can be better deployed with other assets with higher returns and/or better property profiles. I'm not going to go into the process but I will tell you, I worked for, my only time that I wasn't in this industry, I worked for the Disney company, Walt Disney company in strategic planning.

They had a rigorous process for evaluating capital allocation, hired a whole bunch of MBAs put them in the room and let them duke it out for capital. They had a process and a framework for generating great ideas, they had a process and a framework for executing and making sure that they, that the best ideas because we’ve got a long list, are the ones you’re focused on. So, we have process in place that I’m very focused that I’ve worked with Amy and the finance team doing implement; and the operations teams where many of great ideas come from and I’m pleased to say, it think that’s working in the near term, we’re going to utilize the combination of our operating cash, select asset sales, proceeds, project financing which we already have in place to fund major plan capital projects in our pipeline for 2013 to 2015.

One of the big concerns I have heard from people as I walked around was do you have the liquidity to execute on your investment cycle? We do. We have it for both improved cash flows, we have it from liquidity from asset sales and we having then project financing because I talked earlier about that snake with elephant in it, we are still working some very important projects through that process. And in the near term 2013 to 2015 we have the financing and liquidity to be able to execute on that and I’ll talk about that in a minute. Again, we’re improving the core. So, and then starting in 2016 I think we’ll be in a very strong position at that point where we have project CapEx expected refinancing and operating cash flows.

We believe there is $20 million to $30 million of opportunities above our normal CapEx on a normalized basis once you get these big projects beyond us. And we believe that the cash generating ability of our business model will be sufficient to fund those CapEx projects.

So, from improve the core to extend the core; grow into close adjacencies. We could talk about some of that. Again, I just talked about growth build in to a model. We have recent capital investments Copacabana, Splendido, ‘21’ Club, the list is just coming online. We’re expecting this to really have a positive impact in the peek kind of holiday season.

We think that these can generate $68 million incremental EBITDA on stabilization. Stabilization means different things for different properties but we think we’re working very hard but not just forget the fact we just made a massive investment in so many things but to extract the incremental benefit from them. And then the new additions to our family; El Encanto has been a capital consumer, shall we say, capital consumer, and has not generated all that for us. As we move forward, El Encanto has great potential based on what we’re seeing in the demand, but also from a product perspective and we’re also and we also talk about Palacio Nazarenas that hasn’t reached its stability level either.

So, what we’ve got is those assets and Orcaella, which I’m thrilled, will be joining our Myanmar River Cruise to Road To Mandalay, we’re on target for an operating to that. Those are incrementally very attractive investments that have not translated into yet revenue and EBITDAs. So in total, we built into the system 12 million to 16 million, maybe more, but on stabilization we have again the messages there is growth in our model, there is growth in our model that going off the farm.

Invest in the select new portfolio investment with attractive ROIs. Let’s get back process let’s get back to investing where we’re best suited for our products and highlighted one there here I think you’ll also note couple of the one. I have highlighted are our key performers Charleston Place, Grand Hotel Europe. Great opportunities there both from an incremental ROI perspective but also from a defensive and do the right thing with the assets value.

Somebody asked you know again earlier, how much the for name and all that sourced up have, there is some probably no more than other companies who live through a difficult period of time but if we don’t invest in these assets, the underlying asset value regards with EBITDA which will trail off. The underlying asset value will be severely challenged.

So, we think within our portfolio and with our process better capital allocation. Execute on new opportunities to leverage for capitalize on brands and infrastructure. As I open that bag, that bag of opportunities that we have within our businesses it’s clear to me that we had a couple of things. And I’m highlighting a few from an example perspective as opposed to from a comprehensive perspective.

We have, you know, as I looked that you look at your balance sheet, you look at what you’ve got. We have this incredible train set down in Australia in storage that we own. I think it cost $30 million to build and we own this it’s perhaps best the train we have in the system that has been out of service and in storage where we’re actually paying for the storage for quite some time.

I think there is a great opportunity to take that asset and deploy it in a place where we have infrastructure, many people and operations and where we’ve customer based that we know we’ll benefit from that. Great opportunity there, we’re not ready to announce where that’s going to be as well as technical challenges to that but with relatively a modest incremental investments, we can add the other new property that that’s very well that’s what we do.

Management contracts, I have been asked about this is if the way forward and the answer is, yes, incremental levering what we have. It is not the silver bullet, tomorrow we’re not going to wake up and have 12 new management contracts in there. Because I will tell you in that caution it’s very probably positive, I will tell you that if we focus all on that, we’ve got 46 owned assets that have real opportunity and if we get through distracted on the management side I think that’s a problem that doesn’t mean it is not an opportunity and I think we will have more to announce on that we’re focused on it, we’re going to do it quality versus quantity I know that’s a nice thing to say. But I think that translates into is the more selective about where we do it and being more focused about, let’s get a couple of these on board and start generating confidence, start generating confidence in the marketplace and start generating internal confidence so that we can execute on those and actually we have got one that is fairly long away in the financial discussions that we will hope to be able to make some announcement later this year.

So, management contracts would be a part of the story, if not the whole story. And then finally as I look in that bag so to speak, what great brands do we have; opportunities to leverage our existing brands to do more. We get inbound all the time from people that want to help us execute and take advantage of the brands. Cipriani Restaurant, ‘21’ Club, Raymond Blanc in London, we have more opportunities there than, more inbound calls than I would like; but there is an opportunity to take the brands that we have, monetize is probably the wrong word, capitalize is probably the right word. We have opportunity to unlock some value within those existing brands.

So again, we are focused on this box. Great near-term opportunity to improve the core, to embed with what we have, to extend the core and grow into close adjacencies. Again this roadmap provides us with optionality, in the near term; it’s a great opportunity to enhance shareholder value, to grow our EBITDA, to get our stock price up, and to be in a position of strength to evaluate what I would call more transformational opportunities.

Let me move on to summary but before I do, well did anyone see the X Games, and I will let probably little bit out of demographic, the X Games, when I was up there visiting they were putting the skateboard ramp for the, and I guess the BMX ramp was right out in front in that green space there, great feature. It was unbelievable when they were filming it. They were showing our hotel, they were showing this beautiful setting. This is an extraordinary hotel, The Hotel Das Cataracts in the Iguassu Falls. I am not sure what the skateboarders and the BMX folks, where they stayed. I am not sure whether they really stayed at our hotel, but it was a nice focus.

So what I would like you to take away from today. We are well positioned to benefit from favorable industry dynamics. Talked with one of investors earlier in a theme play we are highly leveraged for recovery. We own our assets, there is great follow-throughs, if you get positive industry dynamics which we think we will with limited supply, continued recovery in North America and kick starting, it may not happen tomorrow, some of our other markets so it would be more challenged other than the U.S., UK and then Europe; great opportunity for flow through in incremental. We get some wind behind us, we are focused on the things that we can control but also we will also benefit from the things that we don’t control. You got to be in a right position and make sure you have got your business working right in order to benefit from that. So, in addition to that attractive growth here, opportunities to improve the core. We have got the right leadership team in place and we are executing on that, our organizational structure and our enhancements and costs as it relates to that.

Increasing revenue generation, Ralph's come on board, that will take some time but there is great opportunity for us as a company to drive incremental revenues. Our balance sheet; we'll continue to improve that. We have got financial flexibility. We are in a good spot from a financial perspective and the liquidity perspective and that's the place I want to be.

Strong EBITDA retentions as we recover and strategic capital recycling; we will continue to do that. Finally, attractive growth opportunities to extend the core, again not just improving the core, we have got some growth opportunities baked in here that we can actually execute on with a lower risk profile that I think will benefit us. The results; look this is all about driving shareholder value both in the near and the medium term but we would expect to see our EBITDA is growing and enhancing our underlying, iconic asset value; yes that asset value is enhanced by stronger EBITDAs, but it's also enhanced by doing the right thing for the assets.

So, I think that's where we are. Let me take a quick drink as you guys start thinking about questions but thank you.

So, questions from the front row.

Question-And-Answer Session

Unidentified Analyst

I heard you mentioned group in your presentation like the whole time. You mentioned some stats on the call yesterday I didn’t commit them to memory, but what is group as a percentage of the mix now? What should it be based on your observations throughout the industry, and vis-à-vis the occupancy closing that gap back to peak and then maybe getting past it? How do you think about that?

John Scott

Yes that’s a great question; I will highlight it and then maybe I will ask Philip to comment some more on that. Our mix because we are largely leisure we're largely smaller tend to be 15% to 17%, so 15% to 20% which actually surprised me. At Rosewood, ours were lower than that. I think it’s weighted a little bit because we have places like Charleston Place, a big group house, a big driver. What I'd say on smaller hotels, it’s generally 10% and some of our larger hotels that might skew up towards 20%. So, the opportunity there is and it's been soft; so I think that tells you the mix, if we can get that moving a little bit, that can't drive a percentage point and occupancy very quickly.

I will tell you that that takes a little time it takes time for the market place to recognize and you start selling and sorts of things. So, it is one of the levers we have, you got to be little careful because our properties so leisure, created the wrong group, creates the wrong experience if you are staying at the hotel Cipriani and next to you a bunch of people with name tags, I am not sure how good feel about your €2,500 euro rate. So it is a balance but there is great opportunity there and Ralph is focused on the right groups, the right meaning stance, incentive planners and then look even on our website. We did not have a group include booking type of a model where people could get information for groups and that could be a family reunion that could be a celebration that could be whatever we are up in the game on that, so are there questions over here.

Joe Greff - JP Morgan

Joe Greff, JP Morgan John maybe you can talk about in the last four or five months since you joined the company. What has surprised you to the upside, what has surprised to the downside relative to any preconceived notion since joining? And then a second question, it is a numbers related question what are your predecessors had communicated and has this belief that on a same-store basis the asset portfolio right now had a potential to deliver peak EBITDA in the $140 million range. One, do you share that view? And two, what is your updated view if that is not the case?

John Scott

Yes, so let me start with the first question. Surprises, on the plus and the minus, so as I gad out to the properties, I have seen nine and I think that is a lot in six months given where our properties are but I have seen a lot of our core property and drivers so what has surprised me on the positive side is as I talked about earlier we used to have a portfolio there were Four Seasons, The Ritz-Carlton and go in and it was really about tweaking around the edges there was not a whole lot of either real estate or operational opportunity to execute on that.

So, within these properties, we have great opportunities to, the list is long in terms of opportunities, both on the incremental investment that could drive both, drive to other opportunities and on the operational. So I think what has pleased me which is also the negative is that within the core of the properties there is a great opportunity to generate better results either through strategic investment the properties either give you a normal CapEx or our incremental CapEx.

The other thing that I have seen that has really been a eye opener the scope and scale of the, the pluses of where we have our businesses operating, yes we are spread out around the world but as you look at the slide we are fairly well diversified in some key high growth areas, and so I was a little worried that you had orphans you had these assets who are all by themselves, who have got not a lot of infrastructure. The goodness is we are reasonably weeding our way through a lot of these orphans and will continue to do that. So once you get the right cluster and you have the right operating team executing on that; that was the positive for me.

Some of the challenges that I find, look, I’m very touched about brand. Our brand is a complicated architecture, in that I wish to say, I wish it was easier to figure out how to get the guest to connect the dots in terms of the brand Umbrella. You know propping Orient Express in front of The Cipriani which might be a perfectly reasonable strategy, in my old days of Rosewood; although we didn’t do it at the Carla. We didn’t put Rosewood going to Carla, a little bit of a disconnect. So getting just to recognize that there are probably something, that this is a great portfolio of assets to getting it them go from one to the other, is hard. And it’s hard with our brand architecture and that’s something we are looking through, those doesn’t relate to investment but also doesn’t relate to what is that brand architecture and how we make it work better.

It’s really hard. So I would acknowledge that that is going to be a challenge. So on EBITDA potential, we don’t give guidance. I think consensus is $117 million, $120 million EBITDA this year. I think as we just highlighted, I think there is a fair amount bake into our system, that as we get the stabilization, if you were looking at you know $10 million to $20 million and the stuff that we have in the pipeline plus executing on the revenue in the sales stuff, getting back the piece PC-EBITDA with there on a number of our properties, getting new ones back to it, I mean getting the ones that are still off, and then also getting the new one that we have re-introduced in there, you know going to drive a fair amount of EBITDA, and that is going to give an aspiration of $150 million EBITDA target. Is it realistic? Sure.

Again, I think if we do the right things and we also benefit from some of the macro trends that we were talking about, you know there is a real opportunity there are some, not answering it specifically but I think directionally there is a lot of growth potential not only on the revenue side, but EBITDA growth. Well I wouldn’t have been the right person for this. Other questions?

Unidentified Analyst

The one point increase in occupancy leading to 3 million in EBITDA and 8 million in annual sales. Is that a current run rate or how should we think about it? Are we there yet, or will this be something that works on an annualized basis? And can you also talk about the potential for the retention to move from 40% to a slightly higher number.

John Scott

Yes, I think, again that's meant to be illustrated and it was incredibly powerful to my team in terms of focus. Look, here's what that can translate to, I think we talked about the revenue generation, we talked about macro trends that we're seeing and we talked about new markets and those sorts of things, those are the things we could do that hopefully drive across the portfolio increase, lived in occupancy. So those are what we're keenly focused on. So, what's in the budget again we're not giving guidance on those sorts of things, but we think there's real opportunity on that. But on the flow through side, the 40%, our target is 50% flow through retentions. And this team prior to me has been executed fairly consistently on incremental revenues at a 50% flow through. So we use 40 because it's a very diverse portfolio and frankly because it generates lower numbers, so the team in terms of a focus, I will tell you they're pretty good on the flow through.

I wish there were more cost squeezing opportunities within this business model and there are some and Phillip in the operations team and Martin in the finance team are pretty focused on that, I think there's more of a revenue opportunity, than it is a cost opportunity while saying that maintaining a culture of good cost discipline if you see at the corporate level but also the property level's really important. But I think there's some ways to get through purchasing and some more corporate level driven efficiencies you can take some cost out of the properties, HR, there's probably some we can do on a comp benefits and those sorts of things. But generally are in good, high operating leverage situations where incremental dollars flow through very, very (well). Small hotels have got a reasonably high fix, you've got a fixed cost model, you're very small, it's hard to get rid of. It's not like we have three layers at the Cipriani, we have a managing director and assistant, and by the way Four Seasons used to this on our back as a hotel owner there was four people in the system that were all in training for the next hotel they were going to go on to. We don’t have that here; we've got a great team that's been in place for a long period of time. Any questions?

Chris Agnew - MKM Partners

How are you thinking about aligning incentives for the management team, both from at the corporate level and property level? And what are the key operating metrics for you? And then maybe one just sort of more detailed, in that proceeds from 2 to 3, or the proceeds from the 2 to 3 hotels, is that net or gross?

John Scott

Look I'm glad you asked the questions, particularly since my team is here and I will be drawing the stats from my board. Look aligning my team, as I came on, I think I met a number of you as I walked around one message is resonated with most of you was alignment of me with you, which is to say I’m keenly focused on the equity opportunity here as opposed to the current comp opportunity and kind of current private equity back on it, that’s what drives me.

My team should also benefit from that same metric. If we’re able to succeed and get the EBITDAs up and generate the share price that I think is achievable here and again I didn’t come here for 9 to 12, and I can get price targets but I wouldn’t have taken the short that was in 9 to 12, my team should benefit from that and that should give you broader confidence that what we’re highly aligned. Management share ownership is too well. So, I’m working through that with my board and trying to create a model and a framework for getting them, yes, there is annual grand that’s what our first step but there is a way to get the team and we did succeed further, broad and member getting the team wide in both in terms of fair completion.

I will say in our, we’ve come a long way on that model. As I look back somebody challenges me on the earnings calls look back and while central cost mature than it use to be. 7 million of that is fact base compensation. That didn’t exist in 2007, that exist today but is still a low percentage in misalignment. And so I want to get more on that level and that as a team - focus of my team member, I’m glad you accept because it’s a topic of Board discussion on a regular basis. And if the investment committee is focused on it that’s absolutely the right dynamic.

Unidentified Analyst

(Question Inaudible)

John Scott

At the property level, very good question, that is a very good question. We’re looking into that it does not exist with the poverty level other than our key region folks, the tension that I had even in Rosewood. And then I’ve seen in other management companies is that at a property level you have, we have had that much turnover you have a lot of turnover. It’s a little bit more indirectly related to the corporate kind of success model. But you are the first person to push me on that and I really haven’t drilled down into that. I think that’s a good opportunity for us to look at because those are people who delivered the results.

I’ll remind our team all day along, it does not happen in London. It happens on the properties. So, if that’s what we say (inaudible). A good question.

Unidentified Analyst

(Question Inaudible)

John Scott

Yes, proceeds, net or growth. Martin?

Martin O’Grady

It’s a gross number. One of the assets that we’re considering has been a debt of about €20.

John Scott

But the other ones don’t. So the assets that we’re selling we can’t get a lot of debt on it and again that will come down to execution which you’re able to get at two to three and so, you know, we’ll see but strategically we recycle in that capital is going to be important, are there questions in the back, we haven’t had anyone in the back?

Unidentified Analyst

Couple of questions; first is, with regards to you capital structure, what is the thought process behind having debt tied individual properties rather than having an overall corporate structure and just terming it out particularly giving out favorable rates right now?

John Scott

That’s great question (inaudible) but Martin is (inaudible).

Martin Grady

I think it’s an historical reason where the company was taking some fairly aggressive positions and trying to get as much leverage as possible in pockets of the world which is enabling it to go and acquire a lot of these assets. And, you know, a lot of those works out very well, but in another cases, it didn’t work out so well which is one of the reasons when the financial crises came, we were at a very highly leveraged position. And we talked about it ten times but actually it’s much worse than that because what was happening was, the company was chasing very cheap debt and they could only do that in the efficient capital markets in Europe and North America.

So, those were assets when you feel back with much higher leverage, sometimes 15 to 20 times. So we’ve been working to get that down. We set that target of below five times. We’ve got to that because another target that’s getting under four times but what one of the other things I’ve been trying to do is re-balance that leverage so that we can bringing down the leverage in those developed countries, but also getting some leverage into emerging markets best for example just about we have not executed the slow in Russia. But it is small level of debt but in a expensive fees of debt that we should want to keep it low.

To answer the question why we don’t have corporate turns facility, I’d love to have a corporate level facility but when we talk to the bank; they say to us we have to have an investment grade rating of three to three and half ties net debt to EBITDA. So that’s definitely on the radar and if I found talking somebody next week about the very topic, but that’s not something we could implement within the next 12 or 24 months. But beyond that definitely would be a great.

John Scott

Yes, that falls kind of transformational stuff, can we change our capital structure provide better permanent financing type of model and the answer is yes, there are also benefit by the way to property level debt it’s isolated and tend to get little bit more than you can at corporate level and but you’re right debt markets have been unbelievably attractive and it certainly make Martin’s life and our life a lot easier if we have one corporate facilities as opposed to 46 or that’s more than we have but multiple facilities, so it’s on a radar.

Unidentified Analyst

Yes I mean it just seems like to the extent rather than when you show a maturity profile, saying ’13 or ’14 or ’15.

John Scott

Well you are looking at 5 and 10 years.

Unidentified Analyst

Yes and then just secondly this goes to Chris’ question alignment of incentives; what’s your - you guys have this convoluted share structure that doesn’t really make, I mean respectfully it doesn’t seem to make a lot of sense, particularly in alignment of who actually owns the business. Is there any discussions around potentially just crossing that or you know just giving, helping to give those of us investing in the company, confidence that it is being run to maximize our value rather than something else?

Unidentified Company Representative

Yes, it’s a great question. I heard it, I hear it every time I go out and talk to investors and well it, I say it’s my broken record but by raising it at that level each time, we hear, I hear, I had been here six months, I hear that every time I talk to shareholder. I will put it in this context because it’s something that has been around for long time. I will put it in a context that the board hears it, the board is listening, I wouldn’t have taken this job if I thought this board wasn’t helping to change both in terms of renewal and in terms of governance and all those sorts of things. It’s debated. We are making, action speaks louder than words, you got to see we are in a journey from a corporate governance perspective and we are working our way through that. That’s not a cold way for saying, its going way tomorrow, but it is told because we can debate this, I am not sure but it’s good if we are saying that this board does understand the extraordinary responsibility of that share structure and if indeed, it is actively debated in the board room, I will tell you that. It is actively debated in the board room.

And I will say beyond that what is actively debated in the board room is broader governance which is to say look four of the nine directors that I have on the board right today, were brought on in the last two years. So as this board and as we continue to bring on the right skill set and the right people, there is opportunity for renewal and that’s what we are saying if not (inaudible) we are representing everybody’s, we are going to tomorrow turnover some switch. We will have a new board but we are going softly go through renewal and make sure we have got the right resources on the board, who can help to make tough decisions. Tough decisions on capital structure, tough decisions on asset allocations, tough decisions, I need a thought partner, a board that is a strong thought partner and that also can help me manage this real tension as it relates to maybe share structure because I am running the company, I am focused on the things. I can focus on which is executing and this is a constant source of challenge for investors and for us as a company there is arguments there is a overhang and those sorts of things. So, all I can do is reassure you that I hear you; look at my past and look at my history and where I come from. That should give you confidence; buy is not to say anything but is changing but that should give you confidence that I as a voice will continue to focus on good governance. And I think we will get there, you got to, actions speak louder than words. So, six months into it; it is simple to say give me more time but we are making progress on governing not just AB; we're making progress on governance.

Unidentified Analyst

And just one last question; and this kind of highs in it makes sense that you wouldn't want to come into disposition to take a clock in $9 to $12 and it does seem like the Indian hotels offer was low; most would agree that these assets are worth a lot more than that but potentially it just seems like that deal; there was a bit put out; there really wasn't any discussion because perhaps they could have gone from where they were in $12.60 to somewhere much higher with some dialogue with the Board and this was sort of tied back in with the share structure which is that; what's the thing; what is this being run for exactly to who’s benefit is this being run for and could you give us just some insight into how the Board actually evaluated that offer and why they decided not to engage in any discussions beyond just saying this is an inadequate offer?

John Scott

Yes, I will not go too into depth because; for a couple of reasons; one, I wasn't in the boardroom, I was sitting in a little room next door as they made the decision to bring me on Board. I wasn't in the boardroom for that dialogue; I will tell you they hired very good advisors, went through a very thoughtful process or I wouldn't have been comfortable, walking into this situation, put me on hold, fine guys I have two tickets; one was back to Colorado and one was to London. You guys make the decision, what's the right decision for the business and I think they walked through that and I am not an M&A but I have done enough M&A.

They, I believe the Board made the right decision and followed the right process; there is always a counterparty on the other side that does different things as well. I don’t know why they didn’t come back; I don’t know why the dialogue didn’t go more broadly than that. But I do think I can tell you they took it very seriously this was; the AB structures are blunt instruments, it’s been used bluntly in the past and when you don’t have alignment on that, it’s a problem. In this case I think they really did do the right thing which was a thoughtful analysis of it. I'm not going to (introduce) M&A people here in the room; that process of engaging with somebody who puts in a low offer is probably not the right way to extract the most value from a business. So there is a process issue which we can all debate because again I debated it, others debated it, it is not there, it’s gone, they went away.

Opportunity is to get into a position of strength so that when you evaluate your options you are doing it from a position of strength and not a position of weakness. So, that is what I can tell you I was not in the room but knowing what I know today I think they took it very seriously and they went through a process. Might not have been the outcome that maybe people would like other than I did here consistently that not a seller 12 not a seller 12.5, I am glad I am not either so my answers request without me being able to go any deeper into that. So other questions not a, b and not (Tata) that is my only criteria and the only thing standing between you and lunch at the 21 Club is me, so we will take a couple of more and then migrate on okay so we are ready here.

Unidentified Analyst

(Inaudible) Capital. Could you tell us how many interested parties there were in the two properties that you recently sold and how active was that market?

John Scott

Two that we sold you mean Cupecoy and Westcliff, no I did; I was in charge of getting them executed not in charge of the process, Martin?

Martin O’Grady

What I can tell you is at Cupecoy is that there was; let’s say a very few, it was a challenging asset, deeply involved and I think we in the circumstances actually got a very good price for it at the end. And the Westcliff, they were a handful, there was a process that was run-free, we did have brokers involved. It was handful of potential buyers towards the end, so there was some competitive tension there.

John Scott

And then the buyer (inaudible) I have known him in the hotel business for a long time they are a very thoughtful strategic buyer. And frankly while they are going to bring in four seasons there, I think because it's group and you need a change to win and frankly that asset needs a lot of capital which was part of our decision making process. They have engaged with us about; are there other opportunities we like you guys, we have seen what you can do; are there other opportunities you partner from a capital perspective and do things. So that transformational thing, are they capital partners that can enable us to leverage our Asian assets and do more in Asia.

We look for ways to leveraging what we have which is an asset based in regions infrastructure and a good operating platform and from time to time, I would probably rather leverage somebody else’s capital than my own.

So, but those were two challenging assets so the line and look when you are selling the ones that are on the fringe for us, it sounds like selling one of your core assets where there will be a long line and you could demonstrate and I know people have tested us on this much, so when you wanted to sell when you really wanted show what the value will be, I am not sure that’s the right decision. So let’s prune around the edges, let’s extract the capital that we didn’t get out of it, be good discipline, and get good multiples on EBITDA. But that’s because a lot of EBITDAs are pretty low. So we will try to be disciplined about execution on sales.

Gautam Chand - Instanex Capital

I am Gautam Chand from Instanex Capital; my question is about valuations of the company on a per share basis. We know from the board’s interaction last year that 1263 was considered too low. Knowing what you know about the company and the assets and the way you are going, what you think is the fair price for the stock, either now or in the future and if you can give an approximate target date as well.

John Scott

I wish I could. My lawyer is advising me not to answer that question. Thank you, Rich. I am not trying to be deflective, that’s a hard one to answer, and we don’t give guidance, and we don’t give stock guidance. I think the soft way around it is as what I said earlier, in joking, is that that opportunity from a 9 to 12 wouldn’t have been particularly interesting for me. That doesn’t define what the share price is, but it defines the fact that I think and the board thought, and frankly many of you thought that 12 was not the right metric, that 12.5 wasn’t right metric, and by the way who knows where that would even close. And then you know (Tata) has their own set of issues going on out there too. So it’s not just about the bid, and working the bid, it’s about is it the right time, is it the right context and can you run the right process to extract the most value out of it. I will say one thing, luxury assets are unique. And this, I brought on not to sell this business, I brought on to drive on value. If you miss the opportunity, a luxury asset, whether it’s a hotel or a portfolio hotel, but which, by the way is very hard to replicate, and you couldn’t replicate this portfolio today. If you do that in the wrong time because of the macro context, and you can all argue that there is a lot of debt out there today, and so maybe that’s driving and, there’s been a bunch or research report that says this is now a good time to sell. And if you do that along macro context, and you do that wrong micro context; micro context being where are we at the company? Are our EBITDA is clicking on our shoulders, do we have a CEO running the business? Where are we as a company? If you don’t do that, if you don’t do all the things you can do to position yourself in strength, it would be very unfortunate to be steering down gone at an opportunistic bid. So that’s all, look my experience has been in this business. There is a lot of picture you dust out there. Right buyer of an asset, it' right, buyer of a portfolio and all that sort of stuff and it isn't always related as you all well know, isn't always related to EBITDA, but it is related to the underlying confidence as that is a great business and that is a great asset, so that, I'm not brought on to sell this business I'm brought on to do the right things for this business, and I will tell you, it’s sticky, it isn't happening in 6 months, 12-24 months we will have traction and we will be showing improved results, and you know, that's a challenge and we're in a public wrapper, these businesses on a quarterly basis are hard to measure true performance, these businesses on a longer term basis are extraordinarily valuable particularly when you can't replicate them. There's somebody upfront.

Chris Jones - Telsey

Ah yes, quickly, Chris Jones from Telsey. Two quick questions, first, as you mentioned your prior employer sold for record valuation, when you look at your prior in Rosewood and OEH here today we look at what do see the opportunity relative to, what’s ultimately tracked to that valuation and what the opportunity is for Orient Express. And the second question would be, we talked about management contracts for quite a number of years here at OEH and we're kicking it down I guess another year here, what is it that makes it so unappealing for OEH and what has been the challenge to get that done.

John Scott

That's a very good question, so I don't want to spend too much time on past life experience but the assets that we had in Rosewood, the Carlisle Hotel, what drove valuations. The management company and the brand, operating platform that could be leveraged, higher source of interest and the quality of assets that we had in there the Carlisle, The Mansion, Turtle Creek and those sorts of things. So the combination of a business platform, a brand, and quality assets was appealing to people on, a lot of different people for different reasons. Real estate, operations brand, so percentage through here, we've got a great brand, largely on leverage but a good brand, if we do the right things with it, we can enhance, we got unbelievable assets, we got a very good operating platform for somebody. So I think there's a lot of commonalties but you know again, I'm not starting with the ending line which is to sell this business, I'm starting with the start line which is wow, the question earlier, what do you see as the great opportunities. There's good opportunity here in the near to medium term to do the right things and those all lead you to better options.

And the second question again was management contracts. So impediments for that, focus, you know (inaudible) great guy and he was redeployed on asset sales at a time when that was probably a higher priority even third party management deals. So, focused even we deployed on our priority. Good guy, (inaudible) but we’re really not setup for successor. So I think it’s about focus and getting a couple of these under about and by that I mean look there is a lot of; when I came in something was sure about Rosewood, I came into Rosewood and we had 6 things in the pipeline. Orient-Express had 6 to 12 things in the pipeline 6 of which I didn’t think were ever going to happen. 3 of which if they happen they would be nervous, we had other infrastructure. So this business is about being very focused where we want to be, who your partners you want to be with and passing all the noise.

If we get imbalance we get people calling and saying work with them and you look at it, you go okay. I could spend a lot of time and effort on that and they would distract what I have is a core research base there that wouldn’t be in your best interest for shareholders.

So, I will say it is a piece of a puzzle having them in London the core team is working with Martin, working with myself. I think we’ll make better decisions and so it’s about let’s get one, we have generating our EBITDA, a revenue generating opportunity of $0.25 million, half of million on that, I’ve seen that I don’t like it if it’s a half million because how much work do you have put in that. So, if we can get, those are like new small asses for us, if I can get few of those and then show owners that you can be successful. And get our brand architecture working little bit better, that’s harder, we had a brand but you don’t have a brand here and we are known as an owner, we’re not known as an operator.

So a little bit of that is, you know where Rosewood was after 30 years with (Kellen Hunt) as you’re known as an operator and that’s what we do. Today, we’re known as a real estate owner and a platform and so shifting their mindset even though they invested in it is harder, users have been done. So, I will say we’re focused on I hope that to announce. But I also want you to hear the message that is hard, takes some time I don’t wanted it to be a distraction to probably other stuff that you heard about today. If it is for $1 million of incremental EBITDA, we own these other assets and they have tremendous EBTIDA, potential goes up and down. That’s kind of how we think about it. It’s a good business, capital likes a good business.

Chris Jones - Telsey

You mentioned high return investments you are making 20 million to 30 million a year, starting ’15 in the pipeline of them in ’13, ’14 and ’15. What’s sort of a return do you look forward, for the payback because the Board has made questionable investment decisions in the past?

Scott John

Yes, that has happened, so some it is defensive chase some of it is we’ve got to make that investment to make sure that you don’t have decline in EBITDA at times its always been very frustrating is, you know, an operator with somebody is also come with that finance background and when progress get rationalized based on potential loss that’s always hard to get an (NYSE:IRR) but I would tell you, with these assets, if you do not do it. You’re in big trouble, some of these renovations are needed just because you’re needed.

So if you blend all that it become very hard to say you know I’m balanced at $50 million or that $100 million are going to generate 20% (IRR) payback but I tell you how I think about it, I generally on these projects in property level like to see a 3 to 5 year payback it certainly exceeds our lack, it’s certainly you know extraordinarily important for us to do on multiple wins but you know generally we’re seeing 15% to 20% (IRRs)from the team and I’ll tell you Amy does a great job of you know holding our team accountable on those numbers and we go through a rigorous process and Martin and team and then Filip with the operators.

There is a process in place so it’s really properly evaluating these, you don’t always get it right. We also have a whole lot of (postmortems) so if I’m talking about these assets they’re coming up and coming online really important stuff is to measure it okay, how does that translate back to what we thought we’re going to get when we started and why is it different. So that discipline I think has been still; look again the challenges there is way more opportunities and we can get to that’s good and bad. I’d like to get the more of them, we can’t, so the best ones are the ones we got to focus on, yes.

Chris Jones - Telsey

(Question Inaudible)

John Scott

Great question because we all talk about project CapEx, maintenance CapEx is we say three to four but we’re thinking about as what different these days we’re actually thinking about from a collective perspective at the corporate level meaning - okay, if it is 4% net generates on $500 million, $20 million worth of maintenance CapEx and some it buried in the maintenance number, I mean, doesn’t even hit your CapEx line it’s actually in your maintenance number, but here is $20 million to $25 million in maintenance CapEx if some of these projects should be pushed back down to the property level and say guys find it in your CapEx.

So I started doing little bit of that and that was a new thing where you say okay guys, you know, the company works for a million dollar project your CapEx budget for the year is quarter to million and half, how much is that $1 million can you get into your normal CapEx. And then on top of that if your idea is the best idea, we will consider it in the poll. So it’s about being better, you raised a very good point about being better about the total capital expenditure you have as opposed to isolating the two, that just created this alignment. We are going to spend all the 4% in normal stuff and then come to you when they wanted, and they got a really sexy project that’s big. But it is a balance because some of the big projects are really hard to do without starving the property for the HPAC that you need to do the, the burner that you need to get and that’s first stuff.

I’d like to say it’s a science, it’s more than art but we are getting into more of the science here.

Are there questions before we have a lovely lunch?

Good, well listen I wasn’t kidding about the video, make your bookings. We would love to see you in one of these lovely hotels and we will figure out in investor discount models so we will see.

No discount? I would bet even better, excellent. The management will be here so we’ll spread out at different tables, I would love to keep the dialogue going and have lunch.

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