Orient-Express Hotels (OEH) Q4 2011 Earnings Call February 24, 2012 10:00 AM ET
Amy Brandt - IR
Bob Lovejoy - Chairman and Interim CEO
Martin O'Grady - VP and CFO
Filip Boyen - COO
Joe Greff - JPMorgan
Sule Sauvigne - Barclays Capital
Carlo Santarelli - Deutsche Bank
Amanda Bryant - Susquehanna Financial Group
Ross Haberman - Haberman Management Corporation
Richard Stone - Worldcom
Thomas Sheehan - Thomas S. Sheehan Inc.
Good day, ladies and gentlemen, and welcome to the Fourth Quarter 2011 Earnings Conference Call for Orient-Express Hotels. Today's call is being recorded.
At this time, I would like to turn the call over to Amy Brandt. Please go ahead.
Thanks, Stephie. Good morning, everyone, and thank you for joining us today for the fourth quarter 2011 earnings conference call for Orient-Express Hotels. We issued our earnings release last night. The release is available on our website at orient-expresshotelsltd.com, as well as on the SEC website.
On the call today are Bob Lovejoy, Chairman and Interim Chief Executive Officer, Filip Boyen, Chief Operating Officer, and Martin O'Grady, Chief Financial Officer.
Before we get started today, I would like to read out our usual cautionary statement under the Private Securities Litigation Reform Act of 1995 in the United States. In the course of our remarks to you today, by Orient-Express Hotels management and in answering your questions, they may make forward-looking statements concerning Orient-Express Hotels such as its earnings outlook, future investment plans and other matters that are not historic facts.
We caution that actual results of Orient-Express Hotels may differ materially from these forward-looking statements. Information about factors that could cause actual results to differ is set out in yesterday's news release, the company's latest annual report to shareholders and the filings of the company with the Securities and Exchange Commission.
I'd now like to turn the call over to Bob.
Thank you very much, Amy, and good morning, ladies and gentlemen. Thank you very much for joining us today.
The fourth quarter completed a year of good financial and operating progress for Orient-Express. During the quarter, we continued to experience healthy demand for our luxury, hospitality and adventure travel properties around the world. And in the fourth quarter, our total revenues excluding real estate increased by 10% compared to the fourth quarter of 2010 to $135.9 million and our adjusted EBITDA before real estate increased by 31% to $21.2 million.
Same store RevPAR increased by 11% in US dollars and 15% in local currency and the company's adjusted net loss from continuing operations for the fourth quarter was $9.1 million compared to $15.3 million in the fourth quarter of 2010.
For the full year 2011, total revenues excluding real estate increased by 17% to $587.3 million and adjusted EBITDA before real estate increased by 29% to $110.4 million. Also for the full year 2011, Orient-Express had adjusted net earnings from continuing operations of $4.7 million compared to an adjusted net loss from continuing operations in 2010 of $22.4 million.
Operating improvements in the fourth quarter were led by strong performances particularly at Charleston Place in South Carolina and at the Copacabana Palace in Rio. For the full year, our leader performers were the Cipriani in Venice, the Copacabana Palace and the Grand Hotel Timeo in Sicily. In 2011, 14 of our business units achieved their best ever, full year adjusted EBITDA results.
Our latest revenue and bookings figures continued to show a positive demand picture. For the month of January, albeit a relatively small month, total revenue before real estate was 12% ahead of last January. Currently, revenue from owned hotels both achieved and on the books for the full year, 2012 is 8% above where we were at this point last year.
Over the course of the year 2011, the combination of a $25 million increase in adjusted EBITDA before real estate and a nearly $40 million decrease in net debt, has resulted in a reduction of the company's ratio of net debt to adjusted EBITDA before real estate from 6.7x to 4.8x. This allowed us to achieve a target we set a few years back of reducing net debt to adjusted EBITDA before real estate to less than 5x by the end of this year.
During the fourth quarter we disposed of our excess air rights at the '21' Club for almost $16 million and in January 2012 we continued our program of strategic dispositions with the sale of Keswick Hall and the related golf and real estate assets for gross proceeds of $22 million.
As we have previously discussed we intend to continue with a program of sales of selected assets, retaining management where we consider it strategically and financially advantageous to do so and we plan to use the proceeds of sales to invest in our market-leading properties and to continue to reduce debt. We have an interim target to bring debt down to under 3.5x adjusted EBITDA before real estate within the next two years.
We are continuing at the same time to invest and enhance value in our existing market-leading properties. In the fourth quarter of 2011, we completed the refurbishment of 26 rooms and a restaurant at the Copacabana Palace in Rio and we refurbished 46 keys at La Samanna in St. Martin. I just returned from St. Martin on Monday and I want to tell you that the new keys came out exceptionally well and our guests are very pleased.
During the annual closing this autumn, we will also be refurbishing the public areas of La Samanna to enhance the arrival experience and to add exciting new dining and bar venues. Perhaps some of you on this call are based in the Northeastern part of the United States and even though it has been a mild winter I can tell you there is nothing like hopping on a direct flight to St. Martin and curling your toes in the sand and sipping a rum drink by lunch time, as I did last week and for any of you who think that sounds like a good idea, we would like you to come on down to St. Martin. Call and tell them that you were on the earnings call and that I said we would welcome you with a free bottle of good French champagne when you get there.
Also, during the winter closing this year in Italy, we've been building five gorgeous new suites on the top floor of the Hotel Splendido in Portofino. These will be some of the best suites in the entire portfolio and we expect it will make a substantial increase in our productivity from this already outstanding property. We are also refurbishing several more keys at the iconic Hotel Cipriani in Venice and we are completing this winter the third and final phase of renovations at the Grand Hotel Timeo and the Villa Sant'Andrea in Sicily. We have also begun a major refurbishment at The Inn at Perry Cabin in St. Michaels, Maryland with 39 room due to be completed in the current quarter. And as you know, we will be opening Palacio Nazarenas, which is our new 55 key all suite product in Cuzco, Peru, one of our strongest markets, around the middle of the current year.
We have also continued work on the major construction project at El Encanto in Santa Barbara, which we now plan to open early next year. These two new properties will add a further 147 top quality luxury keys to our portfolio over the next several months.
In the past few months, we have strengthened our executive team with two important senior appointments. First, we welcome Rich Levine from Kerzner International as our new Chief Legal Officer and as the member of the Executive Committee of the company. Second, Ali Kasikci, is taking over in a new position as Regional Managing Director for North America, Mexico and the Caribbean and Filip Boyen will comment on Ali's responsibilities in a minute.
We expect that 2012 will be a year of continued financial and operating progress for Orient-Express. We entered the year with a much-strengthened portfolio and a much-strengthened balance sheet. And we are going to keep improving that portfolio through selective dispositions and strategic investments in our high return capital projects. We will continue to focus our resources on the geographies and the properties where our high end product mix can produce attractive financial returns.
Now, I'd like to introduce Filip Boyen, our Chief Operating Officer, to comment in greater detail on fourth quarter operations.
Thank you, Bob, and good morning, everybody. As described in our earnings release issued last night, and by Bob, the fourth quarter showed consistent revenue and EBITDA growth with adjusted EBITDA before real estate up 31% for the quarter and 29% for the full year.
Our overall EBITDA retention based on adjusted EBITDA for this quarter was 41%, up two points from the previous quarter. If I break this down by region, retention in Europe was 59%, mainly thanks to the ramp-up of our Sicilian properties, strong RevPAR growth and cost control at Reid's Palace and an improvement at La Residencia where we were able to efficiently extend our seasonal closure and have benefited from lower (inaudible) costs.
In the North American region, adjusted EBITDA retention for the quarter was greater than 100% as a result of strong performance at Charleston Place, which benefited from increases in group's revenue and adjusted EBITDA growth at the two Mexican properties.
Retention in the region we call rest of the world was 90%, boosted by the impact of strong revenues at Copacabana Palace and Hotel das Cataratas. A very encouraging turnaround at Mount Nelson and strong RevPAR growth in Asia, notably at The Governor's Residence in Yangon, Jimbaran Puri Bali and Ubud Hanging Gardens.
Same store RevPAR for the quarter was up 11% in US dollars and 15% in local currency. On a same-store basis in US dollars Europe was up 11%, North America 9% and rest of the world up 12%. The fourth quarter RevPAR increase compared to 2010 was driven primarily by occupancy, which has grown by 9% while ADR has grown by 3%.
Looking at the full year, our occupancy showed an encouraging trend as it grew from 56% in 2010 to 59% in 2011, bringing it four points below our peak occupancy of 63% that was achieved in 2006. For eight consecutive quarters, we have seen consistent growth in revenue and occupancy levels. Rising demand levels are supporting higher rates and driving conversion.
Taking each region in turn for the quarter, business in Europe was driven significantly by revenue increases of $2 million or 46% at Hotel Cipriani and $1 million or 31% at Reid's Palace. At Hotel Cipriani, ADR during the quarter increased 9% compared to the fourth quarter of 2010, an increase that is largely a result of the refurbishment carried out (inaudible) the previous three winter closure periods that improved room (sell) significantly.
This ADR increase contributed $0.5 million to EBITDA growth. Our two Sicilian properties saw a $0.9 million year-on-year increase in fourth quarter EBITDA as a result of RevPAR increases of 129% at Villa Sant'Andrea and 22% at Grand Hotel Timeo. Major refurbishment work at both hotels is now complete and our strategy of replacing wholesale suppliers who occupy rooms at local rates with the typically higher spending individual leisure traveler is now starting to show encouraging results.
At Reid's Palace, where EBITDA was $0.6 million greater than in the fourth quarter of 2010, occupied rooms grew 41% due to increased group business and stronger demand from the UK. We achieved an EBITDA retention of 54% at this hotel for the quarter as the hotel benefited from the lower cost base achieved from the prior year's cost cutting exercises and continued cross discipline while revenues have increased.
Similar circumstances of (light) at La Residencia as occupied rooms grew by 43% in the quarter and conversion improved. These improvements were partially offset by a $0.5 million EBITDA decrease at Grand Hotel Europe, where revenue was stable but social tax and energy costs increased significantly.
In North America, adjusted EBITDA grew by $2.4 million in the quarter. Charleston Place grew RevPAR of 14% and succeeded in converting the vast majority of incremental revenue to EBITDA generating a year-on-year EBITDA increase of $1.4 million.
I reported in the previous quarter's call that Charleston Place was on track to equal or better its best ever, full year EBITDA results and I'm pleased to report that it ended the year with EBITDA growth of $1.5 million or 11% over its previous peak. This growth was largely due to strong group and transient business. At Maroma in Mexico, RevPAR grew by 7%, the second consecutive quarter of growth for the property. It may be too early to say, but this could indicate the beginning of the recovery in the Mexican market that we are all looking for.
Also in Mexico, Casa de Sierra Nevada posted a $0.3 million EBITDA increase, largely as a result of cost cutting measures.
As Bob mentioned, we made a fantastic addition to the Orient-Express family during the quarter by appointing Ali Kasikci as Regional Managing Director for North America, Mexico and the Caribbean. Ali will oversee five properties in the current portfolio as well as the re-opening of El Encanto in Santa Barbara early next year. Ali was previously General Manager of the Montage and the Peninsula, both in Beverley Hills.
In the rest of the world segments, which includes Southern Africa, South America and Asia-Pacific, all hotels with the exception of the (inaudible) Hotel, so year-on-year EBITDA growth for the quarter. A record at Copacabana Palace delivered year-on-year revenue and EBITDA growth of $2.1 million or 12% and $1.2 million or 20% respectively, driven by record occupancy and ADR with strong demand from US travelers.
Year-on-year revenues and EBITDA at Hotel das Cataratas increased by $1.1 million and $0.6 million respectively following the major refurbishment completed in November 2010. Furthermore, retention in both hotels exceeded 50% in the quarter.
In Southern Africa, EBITDA increased by $0.6 million with Mount Nelson hotel seeing a 6% growth in RevPAR during the quarter as a result of recent room refurbishments. Following a tough year, this positive sign of growth in Cape Town is encouraging. (inaudible) revenue on the books for the first quarter of 2012 is up 8% on the first quarter of 2011 indicating that the recent over supply issues in the market may soon be over.
In the Asia-Pacific region, where revenue was up $1.4 million and EBITDA up $0.9 million all of our Asian hotels achieved revenue and EBITDA growth demonstrating the continued buoyancy of luxury travel interest in the region. The star performers were The Governor's Residence, which recorded a 51% increase in RevPAR and a $0.3 million increase in EBITDA for the quarter, and Ubud Hanging Gardens, where EBITDA increased $0.4 million year-on-year with a 29% RevPAR increase and very strong conversion.
In general, in Asia, where labor costs remain relatively low RevPAR increases have resulted in significant EBITDA improvements.
Our Trains and Cruises divisions saw revenue increases totaling $2.9 million or 16% in the quarter. EBITDA was $6.7 million compared to $5.4 million in the same quarter of 2010 largely due to a $0.8 million increase in our share of results from PeruRail reflecting a full recovery from the 2010 floods and landslides. And $0.6 million increase from the Road to Mandalay, as Myanmar further opens to the international traveler in the wake of a well-publicized visit by the US Secretary of State in December.
With regards to our performance versus our comp set, for our 13 hotels that report to Smith Travel Research, we remained in a commanding position with a combined 2011 RevPAR index of 115. We see the gains coming in occupancy for both ourselves as well as our competitive set. ADR, which was mainly flat year-on-year continued to lag for both the competitive set and Orient-Express. Within the 13 hotels that report to STR, our two biggest areas were South Africa, which is still suffering for over supply and (Maroma) where the flood of new supply continues to erode our occupancy and the threat of drug-related violence continues.
Two notable market highlights were provided by La Residencia, which finished the year with 162% RevPAR index with big growth in both occupancy and ADR. And La Samanna, which finished the year with 161 RevPAR index with ADR of 23%. La Samanna's growth was particularly impressive considering it was achieved during a renovation year.
In discussing our results versus our competitors, we continue to rank in the top three for leading quality inspections out of a comp set of 12 luxury hotels worldwide and are trailing closely behind the top two competitors. We are continuing to make progress on TripAdvisor. Two-thirds of our hotels are ranked number one amongst the five star hotels within their destinations and the majority of the remaining properties are within the top three.
Our human resources initiatives are progressing very well. Our labor turnover during 2011 reduced by 10% and we saw an improvement of almost 7% in our annual employee survey, bringing us to 80% satisfaction. We have just launched our Orient-Express sales academy as well as our new ambassador's academy, which is an e-learning modular program for our employees, designed to enhance sales by promoting our products and experiences to our clients and guests.
Looking forward, bookings for the first quarter are strong across the board. Revenues for January 2012 were up 12%. Our forward-booking pace for all hotels shows a 4% increase in room nights and a 13% increase in groups revenue.
Looking at the full year for owned hotels, room nights are up 2% and rooms' revenue is up 8%. Looking back on the quarter, we posted some impressive results with revenue up 10% and adjusted EBITDA up 31% and as I just mentioned our forward-looking indicators are positive. The management team continues to focus on driving conversion rates and EBITDA particularly in the challenging markets of South Africa and Mexico.
I'll now hand over to Martin.
Thank you, Filip. Good morning, everyone. Moving down from EBITDA, after our annual assessment of goodwill and (inaudible) balances, we recorded impairment charges of $18.9 million in the quarter. The largest impairment was $7.9 million relating to Maroma and $5.9 million relating to Casa de Sierra Nevada, both of which reflects the recent difficult operating conditions in Mexico.
In the currency quarter we recorded a gain on disposal of $16 million net of costs relating the sale of excess development rights at the '21' Club. The buyer exercised an option to buy 45,000 square foot of development rights for $13.5 million. And we then sold some additional 4,800 square feet for $2.9 million.
Our depreciation charge in the quarter was up 6% over last year at $11.9 million. Interest expense was $7.7 million, down from $11.7 million last year. The reduction of $4 million was largely explained by swap termination costs and a write-off of deferred financing costs last year, which together amounted to $3.2 million. Additionally, this year we capitalized $0.9 million of interest relating to our El Encanto development. Our projected interest charge for 2012 is $7 million to $8 million per quarter.
There was a tax charge in the quarter of $15.2 million, compared to a charge last year of $9.8 million. The current quarter includes a $7.4 million charge relating to proceeds from the sale of the development rights at the '21' Club. Cash tax in the quarter was $3.6 million. For 2012, we are anticipating a tax charge in the range of $18 million to $20 million spread over the four quarters in the following proportion: Q1 20%, Q2 40%, Q3 30% and Q4 10%. We anticipate cash taxes will be $17 million to $19 million spread evenly over the four quarters.
Overall, there was a net loss of $28.1 million in the quarter. Adjusted net loss from continuing operations was $9.1 million compared to a loss of $15.3 million last year.
On the balance sheet at the end of the quarter, the company had $90.1 million of unrestricted cash plus an additional $4.4 million of funds available under short-term lines of credit. Total debt at December 31 was $634.4 million. This is after repaying $4.5 million of debt following the sale of excess development rights on the (New York) hotel project.
Our net debt at the end of the quarter including restricted cash of $13.2 million was $531.1 million and our net debt to adjusted EBITDA pre real estate was 4.8x. Our interest cover ratio was around 3x. Our term debt maturity schedule including amortization is now as follows: 2012 $78.8 million, 2013 $134.7 million, 2014 $128.3 million and afterwards $292.6 million. Of the $78.8 million due in 2012, $24.3 million are maturing facilities that we expect to refinance without any net repayment.
Additionally, $10 million has already been repaid in January following the sale of Keswick Hall. $22 million of gross proceeds from that sale reduced net debt to $509.1 million.
At the end of September, the interest expense on 53% of our debt was fixed and the average cost of debt including margin was 4.3%. The weighted average maturity of the debt was 3.6 years.
Turning to cash flows for the quarter, net cash from operating activity was $3.8 million. There was $16.9 million of CapEx in the quarter, which included $3.7 million at El Encanto, $4.2 million at La Samanna and $1.3 million at Copacabana Palace and routine capital expenditures at other properties. Net debt repayments in the quarter including amortization was $17.6 million.
On the debt front, there's not a great deal to say this quarter. We're continuing to progress the refinancing of Napasai and Observatory, which totaled $24.3 million. We are also continuing to progress the Sicily refinancing and expect to close that deal in the second quarter or early in the third quarter. The Sicily loan balance is currently $52 million and we expect to repay $5 million when we refinance that facility.
In terms of significant capital commitments in 2012, we plan to invest $15 million in the Copacabana Palace where we will refurbish the rooms in the main building and enlarge the lobby area. This work is fully financed through the $15 million delayed draw portion of the $115 million loan facility that we completed last year. On El Encanto, about $60 million of investment remains to be made of which $45 million will be financed under the construction's finance facility, which was also completed last year.
That’s all for me. Now I'm going to hand back to the Operator for the Q&A.
Thank you very much. (Operator Instructions) We have our first question, which will be from Joe Greff from JPMorgan. Please go ahead.
Good morning, guys. I was hoping you could just give us an update on the CEO search. Thanks.
Hi, Joe. It's hard to say much of anything about that until you get it done because you talk to these people – everyone on a confidential basis. I think what we can let you know is that we're down to a very, very small number of what I would call very qualified people. And I think it's a matter of weeks not months before we will be able to announce a structure going forward that I think will be very satisfactory all the way around. But I can't kind of be day by day on that. That’s really about all we can say.
Okay. And then with respect to your 2012 outlook, which we find encouraging, what percentage of revenues is on the books for 2012 as of now and how does that compare to a year ago?
Joe, this is Filip, for hotels only it's 13% and if we regard all businesses, it's 17%.
Great. Thanks, guys.
We have our next question from Sule Sauvigne from Barclays Capital. Please go ahead.
Good morning. I wanted to asked your 2012 bookings, you said it was up 8% as of the end of the fourth quarter. Just wondering how that's changed since last quarter.
Yes. That's correct. I made a mistake here. So 2012 revenue on the books for hotels is up 8% and all businesses 15%. My apologies.
Okay. And how do those numbers compare to what you had as of the third quarter?
They are practically the same. They are practically the same as the third quarter.
Okay. Is that what you would have expected? Or how did that compare?
Well is what is happening, what we are experiencing is a very short booking window but at the same time, we're experiencing a very strong short-term pick-up. So, yes, it is what we would have expected.
Okay. And if you could just provide some color on your customer sourcing for 2012 from the various geographies. How is the demand from European customers hold up versus some of your other regions?
Okay. If I take the quarter from Africa, we had 3%, Asia 8%, Europe 40% and North America 38%, South America 12%. And for the full year Africa the same at 3%, Asia 8%, Europe 43%, North America 37% and South America 9%. The UK, if we take the UK separate and Ireland that is 15.6% of our total geographical mix.
Okay. Thank you.
We will now take a question from Carlo Santarelli from Deutsche Bank. Please go ahead.
Good morning, everyone. I had a few questions. For starters, could you guys talk a little bit about your 3.5x leverage target and how asset sales will play a role? And then if maybe you could provide a little bit more granularity with respect to your bookings, maybe specifically in the European segment, that would be great. Thank you.
This is Bob. I'll respond on the first. We are expecting to conduct asset sales kind of spread over a period of several quarters here. And we think that that will be a piece of the puzzle in getting us down to the 3.5x. As I noted in my earlier statement of course it's a combination of EBITDA increase and debt decrease and we don't expect a dramatic decrease in debt. We expect debt to kind of come drifting down the way it has for the last couple of years and the way it did this year.
But what we're planning to do in a kind of a rough rule of thumb way, is to take about half of the proceeds of dispositions and apply that to reduction of debt and about half of the proceeds of dispositions and put that in the highest return capital improvement projects that we've got. We've got all our capital projects now across the company ranked in terms of priority and in terms of importance competitively. And we are going to go run right after another down that list as we produce the cash.
Carlo, just on the question about the European bookings, in the first quarter they're up about 8%. They're off around about 9% in Q2, but bare in mind it's a small number at this stage relative to the first quarter. And in Q3 they're showing an increase of 10%. Q4 is a really meaningless figure, it's only off by $100,000.
Part of what you have to keep in mind on these booking numbers is they bounce around, is that the group books early. Individuals book late. And trains and cruises book much earlier than hotels. So you go through phases as you lead into a year where different parts of your demand picture are coming into focus and right now, we know that groups are going to be strongly ahead of last year. Trains and cruises are also significantly ahead of last year and the individual bookings are by and large just starting at this point for the high vacation season.
And you also have to bare in mind in the second quarter that we've got a tough comp in Italy because we had the Biennale Art Festival in Venice in June of last year.
Sure. And that 8% that you referenced for the first quarter, that's hotels only? Correct?
That was just hotels, yes.
Great. Thank you very much.
We will now take a question from Amanda Bryant from Susquehanna Financial Group. Please go ahead.
Great. Thank you. Just a couple of things. With the sale of Keswick, how should we look at growth over the next few years within your North American segment? Is it reasonable to expect margins to return to the low 20% range? And I guess if you can talk a little bit about what's the real opportunity with the inclusion of El Encanto in the mix? And then secondly, you obviously touched on group business, talked about it improving in Europe and South Africa. I realize it's a small piece of your overall mix, but is there some sort of new initiative there and basically I wanted to know just what's driving the improvement. Thank you.
Well I don't think we would want to try and give you a margin number for future years from one of our many geographical subdivisions. I think that would probably be getting to a level that we'd have to call pretty speculative. But we certainly do expect margin improvements in North America from a number of initiatives that are being taken.
One of the things that kind of gets a little bit lost in the shuffle is the cumulative impact of all of these refurbished keys that we've done in North America in the last year, from La Samanna to The Inn at Perry Cabin and so forth. And that is going to have – let's just say under normal circumstances that has a material positive impact. Also when you mention El Encanto, I think that the most important impact of all of El Encanto is going to be the impact in terms of our consumers in North America who will see that and who will see what Orient-Express means around the world. But El Encanto is really not in the 2012 numbers at all because we're talking about opening it really a year from now.
I can tell you that Keswick contributed only $600,000 in 2011 although bare in mind it's not in the continuing operations line in the reported numbers.
Got you. Okay. And then if you could just touch on group business. Was there a new initiative there?
Right. Charleston is the hotel where groups are up practically 30% for this year. So that's very encouraging. And then also we've added a person here in North America dedicated to the group sales, which is obviously producing very well. But in general if we look around the world, groups are on the recovery path, but Charleston sticks out as by far the best performer there.
Okay. Thank you.
We will now take a question from Ross Haberman from Haberman Management Corporation. Please go ahead.
Morning, gentlemen. Nice year. Martin, just a quick question on the central overhead for the year, the $37 million, how much of that, if any, related to the operations of the properties versus the holding company expenses?]
That's all of the holding company's expenses. The operations carry their own G&A so that's all relating to the holding company costs and the (inaudible) head office.
Any hopes to bring that down over time? Or that's basically a fixed number.
Well we're always looking at ways to try and bring that down. One of the numbers that does swing around that we have less control on is the volatility of the stock options cost. We always like to pay a bonus and we get a bonus if we exceed budget. So you saw there was an increase there this year. But the numbers should be, for next year, running at around about $9 million a quarter.
And just one last question. If you don't see a pick-up in South Africa and Mexico, would you expect to see similar type of write-downs for those properties over the next couple of quarters like we saw this year?
Well on the US GAAP we have to assess the goodwill and we've pretty much written down all the goodwill where we have any kind of exposure on those properties. Under US GAAP as you know the – you have to project that, the undiscounted cash flows and there's no risk of those numbers being impaired.
Okay, guys. Thank you. Nice year.
(Operator Instructions) We will come to our next question from Richard Stone from Worldcom. Please go ahead.
Yes. Hi. Morning. Just two questions. First of all can you just provide a bit of an update on the states of event El Encanto. I know you've touched on it a bit. But you're saying the investing remaining to be made is about $60 million. What is the spend to-date and how does that compare to your plans? And second question is on the two hotels in Sicily. You said there's been year-on-year EBITDA growth of $0.9 million compared – I'm just wondering what you can say actual RevPAR and occupancy are for the year and how this compares to the targets forecasts when the hotels were acquired. Thank you.
Well first of all on El Encanto, we took a decision out of the asset was shut down during the global financial crisis to – after we were able to obtain financing to start the project again. And at that time we were looking at residual cost or final cost to complete it of about $70 million and that number hasn't changed.
The total book cost by the end will be about $134 million. There's a long checkered history, which a lot of listeners will be familiar with but the (audio gap) number hasn't changed. In terms of the RevPAR data for Sicily –
The Grand Hotel Timeo occupancy in 2011 was 73% compared to 62% in 2010. And the Villa Sant'Andrea was 79% occupied in 2011 compared to 60% in 2010. The ADR was 643 at Grand Hotel Timeo, 503 at Villa Sant'Andrea and for 2010 that was 450 and 329 respectively.
And Filip, for comparison why don't you add the approximate level before we acquired them.
Well when we acquired them, they were run by NH Hotels and the level of the average rate was probably around 200 to 250 euros. So we have more than doubled that at both locations.
Okay. Thank you.
Our last question now from Thomas Sheehan from Thomas S. Sheehan Inc. Please go ahead.
Thank you very much for taking my call. I want to congratulate you, Orient-Express, for the sale of Keswick Hall, Club and Estate. My question is this. I heard the comment that it was sold, the assets, for $22 million. The county records have recorded the sale for all three for $53,000,200,000, or a difference of $31,000,200,000. Can you explain that?
During the previous quarters we had some impairment charges, which maybe are what you're referring to. But in the quarter we had – at the end of the third quarter we had in anticipation of the sale, we had written down the assets to about $20 million. And then in the quarter we completed the sale for $22 million. So there would have been a gain of $2 million in the quarter.
But the county records show the transaction going through with $53,000,200,000.
Well that is not our transaction or else maybe we're going to call these guys up and say, where's the other 30.
My understanding was they assumed $30 million in round numbers of debt and paid you roughly $23 million in cash for the three properties. (inaudible) because I live at Keswick Estate and I'm obligated to ask my question on the basis of the fact that we have a Jefferson Membership in the Club and the redemption of that Jefferson Membership, if we sell our property, I'm to get $60,000 back. And I would like to know, will the new owners assume that obligation. I've made that question to the current Club Manager, General Manager of the Club and he's trying to go up the ladder for the folks in Richmond to give me an answer to that. But I just found it unusual that there is a swing of $31,000,200,000 and to me it looks like that was an assumption by the new owners of your debt. And my question is, are you going to pay the $60,000 or are the new owners going to pay the $60,000? I'd sure appreciate an answer.
I'm afraid, sir, that I think that question should be addressed to the new owners rather than to us and that that question may not be of the greatest of interest to our stockholders and investors. So maybe you ought to take that up separately. If you want to take it up with us, we can put you in touch with them. But I very much doubt that we can act on their behalf on this analyst call.
Thank you very much. You've been very helpful. And I want to congratulate you on the operation and also say that the operation of the Hall, the Club and the Estate under your stewardship was excellent.
Thank you. That’s very kind.
Take care. Bye, now.
Thank you. This will conclude today's Q&A session and also today's conference call. Thank you for your participation, ladies and gentlemen. You may now disconnect.
Thank you, all. Bye, bye.
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