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Executives

Amy Brandt – Director, IR

Bob Lovejoy – Chairman and Interim CEO

Filip Boyen – VP and COO

Martin O’Grady – VP and CFO

Analysts

Joe Greff – JP Morgan

Sule Sauvigne – Barclays Capital

Carlo Santarelli – Deutsche Bank

Richard Stone – Beuben Brothers

Josh Etas – Citigroup

Orient-Express Hotels Ltd. (OEH) Q1 2012 Earnings Call May 4, 2012 10:00 AM ET

Operator

Good day, ladies and gentlemen, and welcome to the First Quarter 2012 Earnings Call for Orient-Express Hotels. For your information, today’s conference is being recorded. At this time I would like to turn the call over to Amy Brandt, Director, Investor Relations. Please go ahead.

Amy Brandt

Thanks, Melik. Good morning, everyone, and thank you for joining us today for the First Quarter 2012 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 our usual cautionary statement under the Private Securities Litigation Reform Act of 1995 in the United States. In the course of remarks to you today for Orient-Express Hotels’ management and in answer to your questions they make may 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 reports 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.

Bob Lovejoy

Thank you very much, Amy. Good morning, Ladies and gentlemen, and thank you for joining us.

The first quarter of 2012 has provided a positive start to the year for Orient-Express Hotels. As you know, several of our important properties are closed during most or all of the first quarter, so this period traditionally constitutes a small part of our annual results. We are pleased to report that revenues for the quarter increased by 10% over the first quarter of last year, to a total of $107 million and adjusted EBITDA before real estate grew from $2.3 million last year to $3.7 million this year.

Same store RevPAR increased by 10% in U.S. dollars and 11% in local currency over last year. The company’s adjusted net loss from continuing operations for the first quarter was $16.2 million U.S. dollars or $0.16 per common share, compared with a loss of $13.6 million or $0.13 per common share in the first quarter of 2011. Please note however, that the 2011 first quarter benefited from a tax credit of $5 million or about $0.05 per share, whereas the first quarter of this year, we incurred a tax cost of about $200,000.

The latest revenue and booking figures show an overall positive demand picture. Revenue from owned hotels achieved and on the books, for the full year of 2012 is currently running at about 6% above where we were at this point last year.

This number has come down a bit from a few months ago, reflecting the early bookings pattern of group revenue, which is running far ahead of last year and the relatively shorter booking window for the individual luxury vacation traveler who was just now starting to book for the traditional vacation season in the second and third quarters. In addition, while demand remains good in many areas, including North and South America, Asia and the emerging markets generally, we are now beginning to see some softening in demand coming out of the sluggish economies of the U.K. and Europe.

All that said, booking pace for all of the company’s owned properties and joint ventures, both hotels, trains and cruises, is currently about 10% above the same figure last year at this time. For the month of April 2012 total revenue before real estate was flat compared to last year. This was affected by extremely poor weather in Italy where it rained on 24 of the 30 days of April including all of the weekends and the dollar number was also reduced by about 4% at the result of the weakening Europe.

At the end of the first quarter of 2012 the company’s net debt to adjusted EBITDA before real estate was about 4.9 times. We are pleased to report that this ratio remained below 5 times through the first quarter which is our low operating season with relatively high investment expenditures. During the first quarter we disposed of one of our Peruvian joint venture properties worth $5.6 million. These funds are being used to improve the financial condition of the Peruvian venture and to continue our ongoing program of investments in our Peruvian hotels.

We have now received the final governmental consent and expect to complete the disposition of our property in Bora Bora in the next few weeks. These transactions are part of our continuing program of portfolio enhancement through which we are monetizing selected assets and retaining management where we consider a strategically and financially advantageous to do so.

We continue to have an interim objective to bring net debt down to under 3.5 times adjusted EBITDA before real estate by the end of 2013. For the year 2012 investments are a very important part of our story. We will open the exciting new all-suite property at Palacio Nazarenas in Cuzco in June. We also will undertake a major renovation of 121 rooms and suites and the entrance and arrival experience at the Copacabana Palace over the Brazilian low season beginning next month.

We have recently reopened 39 fully refurbished rooms at The Inn at Perry Cabin in St. Michaels, Maryland and over the course of the winter closure in Italy we made important investments in room product’s quality at Hotel Cipriani in Venice, Hotel Splendido in Portofino where we opened five sensational new suites on the top floor of the property and at our two Sicilian properties where we have reconfigured all the public areas including the dining and bar at the Grand Hotel Timeo to take better advantage of the extraordinary setting and views.

We expect that 2012 will be a year of continued financial and operating progress for Orient-Express. The portfolio is stronger, and our strategy to improve operations and sales and marketing are showing results. We will continue to focus the company’s recourses where our high-end product strategy can produce attractive financial returns. Although the most important part of the year remains in front of us, we are off to a solid start, building on the momentum achieved last year and moving forward with improved disciplines and processes.

Now, before I hand over to Filip Boyen for a further discussion of operations in the quarter, let me take a minute to address the CEO search situation. As you know, the board has conducted an extensive search over a number of months, which has included discussions with some talented people, but to date, the board has not selected anyone as the new CEO of the company. The board feels that the company’s management team is doing a first-class job and that the company is making excellent progress. Beyond that, we really do not have anything we can announce at this time.

Now I’d like to introduce Filip Boyen, our chief operating officer, to comment in greater detail on first quarter operations. Filip?

Filip Boyen

Thank you, Bob, and good morning, everybody. As described in our earnings release issued last night and by Bob, the first quarter of 2012, which is traditionally our slowest due to the seasonality of some of our businesses, made a positive start with stable revenue and EBITDA growth, with adjusted EBITDA before real estate up by $1.4 million or 61%. Same-store RevPAR growth for the first quarter was up 10% in U.S. dollars and 11 in local currency. On a same-store basis in U.S. dollars, Europe was up 8%, North America 9% and rest of the world up 11%. The first quarter RevPAR increase compared to 2011 was driven primarily by rate, which has grown by 8%, while occupied groups were up by one percentage points.

Examining a few highlights from across the portfolio, Mount Nelson Hotel in Cape Town continues to show signs of growth following the market oversupply issues that negatively affected the hotel in 2011. The return of the TV and movie production group segment to this city and new management team and continued investment in the property, such as the refurbishment last year of 30 keys in the main building and the new Planet Restaurant that opened in the first quarter of 2011 contributed to a 4% ADR and the 6% revenue growth year-on-year.

Our strategy at Maroma Resort and Spa of holding firm on great has been successful, and we are seeing a 7% revenue increase in 2012. During the quarter we enhanced our profit to make it more attractive to the family market and more favorable task coverage for the region boosted visitor numbers from its key U.S. markets.

Despite reduced demand due to mild weather in the key North American markets, revenue at La Samanna was up 6% year-over-year. We will follow our major refurbishment in 46 keys completed in November, 2011 with a second phase of refurbishment this wall, which will include the rest room, bar, lobby and other public areas. This ongoing investment has allowed us to increase our ADR by 13% year-on-year and we are confident that La Samanna will be one of, if not the, most attractive hotels in the Caribbean by the end of 2012.

Another success story in the first quarter has been Napasai in Thailand where for the first quarter was up 31% year-on-year. The hotel’s first quarter ADR increased by 21% compared with the first quarter of 2011, primarily because of our investment last June in creating a new seven-acre lagoon and nature reserve in front of the resort, making the beach one of the best on the island of Koh Samui. This has allowed us to compete at the higher end of the leisure market and reduce our reliance on the wholesale trades.

Copacabana Palace and Hotel das Cataratas in Brazil saw revenue increases of 10% and 21% respectively over the first quarter of 2011. Copacabana continues to benefit from the strong Brazilian economy and is the city hotel of choice for high-end domestic travelers. In June we will begin the renovation of 121 rooms and suites and the arrival experience. This project will further enhance our market-leading position in this increasingly important destination, which will be spotlighted over the coming years as Brazil plays host to the 2014 Football World Cup and 2016 Olympic Games.

Revenue in PeruRail grew by 17% in the quarter, primarily as a result of a 12% increase in passenger numbers on the Cusco to Machu Picchu route. The significant increase is a result of a full year of uninterrupted operation in 2011 and the backlog of demand from 2010 when international travelers did not have the confidence to travel to Peru following the floods and landslides that occurred early that year.

The Italian hotels were closed for most of the first quarter. The Cipriani opened earlier this year on March 16th while the others opened towards the end of March. Total revenue in Italy was $1.5 billion versus $0.3 million last year, thanks to the early opening of the Cipriani and an increased RevPAR in all hotels. Important words carried out during the closed periods included at the Cipriani. Six rooms and suites have been completely refurbished bringing to 70 out of 95 the number of units renovated in the last few years.

At the Splendido, as Bob said, the entire fifth floor of the hotel has been transformed into five additional exclusive suites with breathtaking views over the bay of Portofino. And in Sicily the third phase of the planned refurbishments of the Grand Hotel Timeo and the Villa Sant’Andrea has been completed the forward bookings in Sicily looked particularly encouraging. Unfortunately exceptionally bad weather has negatively affected the months of April especially in Portofino and Venice. However the forward bookings looked encouraging especially from the month of June onwards.

Turning to the destinations where we have faced challenges this quarter, revenue at the Hotel Ritz Madrid was static year-on-year due to the decline in domestic demand and the absence of Middle Eastern groups which had benefited the hotel in 2011. Additionally costs have escalated due to union agreements and inflation. Spain is going through a significant labor taxation spending and other reform making its immediate future uncertain. Despite this bankrupt, the hotel is improving market share. Our RevPAR index is up 3% year-on-year and remains at the commanding 146%. In Portugal revenue at Reid’s Palace declined by 5% year-on-year with the most significant decline coming from a weaker U.K. market.

At Jimbaran Puri Bali revenue totaled by 8% year-on-year and the hotel was falling behind its competitive sets. To address this situation we have initiated actions focused on most strategic pricing. The company has confidence in the potential of this asset and following the success of the 22 deluxe pool villas added in 2009 we are looking into upgrading the hotel’s lower and cottage style accommodations.

At the Observatory Hotel in Sydney revenue fell 2% year-on-year as we have been contending with increased competition with 1,100 new rooms having recently opened at Sydney and many competitors with newly refurbished products.

Due to low water levels on Irrawaddy River we were forced to withdraw Road to Mandalay departures from late February until the end of the season on April 7. As a result we lost about $1 million of EBITDA. We hope to benefit from the recent search and popularity of Myanmar as a tourist destination following the recent high profile visits of Hillary Clinton and David Cameron as well as the easing of European Union sanctions. When Road to Mandalay restarts in its season – in season on July 25. It is notable that our hotel in Yangon, the governor’s residence, increased its year-on-year revenue by 41% as a result of these factors.

Looking at the breakdown of our market segments, the Groups market, by which we mean corporate meetings, incentive travel and leisure groups, showed a significant increase compared to the first quarter of 2011. Q1 2012 revenue from these markets reached $11 million, an increase of 21% over the same period last year. This segment represents 19% of our hotel group’s revenue.

We expect this growth trend to continue, thanks to sales strategies we implemented last year. These measures include the addition of two new directors of sales, for corporate meetings and special events, one based in Chicago, focused on the North American market and the other in Paris, responsible for continental Europe. The U.S. and U.K. continue to be our two largest geographical markets, providing $29.2 million or 50% of total hotel room revenue, a growth of 4.5% over the same period last year.

If we exclude the U.S. and the U.K. markets, all other geographical markets combined show the revenue growth of 15% during the quarter. The growth we are seeing from emerging markets is a direct result of our strategic focus on developing specific geographic markets. For example, in January and February, the sales team completed sales trips to India and the Middle East, where we will have an appointed sales representative, effective July 1, based in Dubai. Additionally, we doubled our sales team in Brazil and on April 1, open the Orient-Express field sales office in Mexico, with PR representation in that market, starting in July.

During this quarter, we have launched a free Orient-Express app for iPads. This delivers the content of our distinguished traveler in-room magazine, plus shows additional pictures and contents. Informative as well as inspirational, it showcases, amongst other things, our recommendations for family travel and celebratory events, plus insights into the experience waiting at properties, such as the new Palacio Nazarenas and recently renovated Inn at Perry Cabin. The app will be updated regularly with new features and I invite you to download it today from the App Store. Search for Orient-Express Traveler.

A Journey Like No Other brand awareness messaging has continued to build with a new film that can be viewed on our YouTube channel, which is orientexpressvideos, all in one word. We have also placed our first print advertising with a full page advertisement in the current edition of Departures, read by one million American Express platinum cardholders in the USA alone.

Our strategy to build awareness with both existing and new target audience will be further supported with a second phase of rich media digital advertising scheduled to run from the end of quarter two, giving us cost effective reach and frequency.

Also in March we held our first chef’s conference hosted by Raymond Blanc at Le Manoir aux Quat’Saisons. Executive chefs from 31 of our properties attended this three-day event that included presentations and discussions on key topics in the culinary world, such as sustainability, ethics, food costs and the current landscape of the astronomy, as well as cooking demonstrations led by Raymond and his kitchen brigade. We will hold this event annually and use this platform to continually raise our standards with regards to the use of organic, free range and locally sourced produce in our kitchens.

Looking forward, bookings for the second quarter continued to show growth. Our second quarter booking base for all hotels shows a 3% increase in room nights and 3% increase in rooms’ revenue. Looking at the full year of all hotels, room nights are up 2% and rooms’ revenue is up 5%. When we include trains and cruises, total revenue is up by 5% in the second quarter and 10% for the full year.

Year-on-year hotel booking pace for the third and fourth quarters are both up 2%. This year we are seeing a very constricted booking window, but we are confident that as we get closer in on our leisure booking window, we will see the amount materialize like we saw in the first quarter, with late bookings at premium leisure rates bringing up ADRs and occupancies. In the meantime, we are taking steps now to address shortfalls for any lagging assets.

The highlight of the second quarter will be the opening on June the 15th of our latest hotel in Peru, Palacio Nazarenas, a former convent and palace. Palacio Nazarenas is a boutique hotel with 55 oxygenated suits, in-room iPads, Cuzco’s first heated outdoor swimming pool, a restaurant showcasing locally sourced and the increasing by celebrated Peruvian Chef Virgilio Martinez and a spa with a product range that incorporates Andean herbs and flowers. The property will be a contemporary reflection of Cuzco’s culture and we look forward to reporting on our progress with this project on next quarter’s earnings call.

I’ll hand over to Martin.

Martin O’Grady

Thank you, Filip. Good morning, everyone. Moving down from EBITDA, our depreciation charge in the quarter was in line with last year at $11 million. Interest expense was $7.5 million, down from $9.3 million last year. This increase of $1.8 million was largely explained by the reduced in net debt of approximately $65 million since the end of Q1 2011 and there was $900,000 of capitalized interest during the quarter, related to the construction of El Encanto.

There was a tax charge in the quarter of $200,000, compared to a credit last year of $5 million, which included a large FIN 48 provision release. Cash tax in the quarter was $8.2 million, that included a one-off payment of nearly $3 million in respect of the disposal last year of the excess development rights at 21 Club in New York that we talked about on the last call.

For the balance of 2012, we’re expecting a tax charge in the range of $24 million to $26 million, spread over the next three quarters, in the following proportions: Q2, 37%; Q3, 43%; Q4, 20%. We anticipate the cash tax in the remainder of 2012 of $13 million to $15 million spread evenly over the three quarters. Overall, there was a net loss of $15.7 million and adjusted net loss from continuing operations was $16.2 million, compared to the loss of $13.6 million in the first quarter of last year.

On the balance sheet at the end of the quarter, the company had $66.5 million of unrestricted cash, plus an additional $4.3 million on funds available under short-term lines of credit. Total debt at March 31, was $627.2 million. Our net debt at the end of the quarter, including restricted cash of $15.2 million, was $545.6 million and our net debt to adjusted EBITDA pre-real estate was 4.9 times.

Our interest cover ratio was 3.7 times. Our term debt maturity schedule, including amortization, is now as follows: the rest of 2012, $60 million; 2013, $137 million; 2014, $132 million; and thereafter, $298 million. Of the $60 million due in 2012, $31.5 million represents maturing facilities, the majority of which is expected to refinance or roll forward. At the end of March, the interest expense on 51% of our debt was fixed and the average cost of debt including margin was 4.1%. The weighted average maturity of our debt was 2.9 years.

Turning to cash flows for the quarter, net cash from operating activities was an outflow of $8.1 million. There was $19.6 million of CapEx in the quarter including $8 million at El Encanto, $1.2 million at The Inn at Perry Cabin, $1.1 million at La Samanna to complete the rooms’ refurbishments, $1.1 million for the construction of the five view suites at Splendido and $1 million at Hotel Cipriani for the six rooms refurbished and routine capital expenditure of our proctors.

Net debt repayments in the quarter including amortization was $6.9 million plus there was a further $10 million of debt repayment from the gross proceeds received from the sale in January of Keswick Hall that we talked about on our last call.

With regards to the upcoming debt maturities, we are making good progress on the refinancing Napasai and the extension of The Observatory, the two loans that total $24.4 million. We are also making good progress on the Sicily refinancing to replace the loan maturing in June, 2013, and we do expect to close that deal in the third quarter. The Sicily loan balance is currently $54 million and we expect to repay around $8 million when we refinance that facility.

In April we closed on a small loan in Peru that is secured on our wholly-owned Miraflores Park Hotel. We have a new $12.5 million facility and a fixed interest rate of 6.6% and a maturity of nine years. This has allowed us to repay an existing loan of $3 million and provides $5.4 million of financing for a significant refurbishment of that hotel later this year. We’ve also received back to the corporate center an amount of $4 million.

Regarding our committed project capital expenditures, as you know we’re still planning to invest $15 million in the Copacabana Palace this year to refurbish the main building and the lobby area. This work is fully financed through the $15 million delayed draw portion of the property’s 115 loan facility. In the El Encanto we expect that our remaining $50 million of investment will include $42 million that will be financed under our El Encanto construction finance facility.

That’s all for me, and now I will hand back to the operator for the Q&A.

Question-and-Answer Session

Operator

Thank you. (Operator Instructions) Our first question today comes from Joe Greff from JP Morgan. Please go ahead.

Joe Greff – JP Morgan

Hello, everyone. Two quick questions, first is on the CEO search. Bob, you mentioned the board hadn’t selected someone; the search is still ongoing presumably. Or are you focused on internal candidates? If you can help us with the current thinking there and if you have sort of a new set of timetables there that would be helpful. Then my second question is with regard to your 6% pace number for your owned hotels. If you gave it I missed it, so sorry. But if you can break it out by geography between Europe, North America and rest of world that would be helpful. And that’s it for me. Thanks.

Bob Lovejoy

Joe, with respect to the CEO search the board hasn’t made any formal decision to search, keep searching, not to search, look internally, look externally. I think you’re just catching us at a time when probably the board’s going to refocus within a matter of relatively brief time. So I don’t really have anything further to announce to you other than to say what I have already said which is that the board’s just very comfortable with the way management’s got the properties performing and the way that the company is moving forward at this time and has not made any selection to bring any outside person in. That’s really all we can say at this particular moment.

Martin O’Grady

And Joe, with regards to your question on the pace, the 6% ahead for the full year. So for Europe it’s up 1%, for North America it’s up 11%, and the rest of world is up 7% at this time.

Joe Greff – JP Morgan

Thank you.

Operator

We will now take our next question from Sule Sauvigne from Barclays Capital. Please go ahead.

Sule Sauvigne – Barclays Capital

Good morning. You talked about...

Bob Lovejoy

Good morning.

Sule Sauvigne – Barclays Capital

Hi. You talked about merging of the property in Peru and I know that asset dispositions are a part of the overall strategy, all flat (inaudible). I’m sorry. I just was wondering what you’re seeing in that market. What kind of buyers are looking at any properties you might be marketing? We’ve heard from like Roger and Rich that private equity has shown a greater interest in hotel assets, so if you could comment on that please?

Bob Lovejoy

Yeah. I think as you know our properties are quite different one to another and in quite different locations. So the mix of potentially interested people from one to another to another really is quite different in these different locations and with these different properties. That said I think we’ve found that the interest was pretty good. We have not seen – I don’t think we’ve seen anything particularly disappointing and I think in most cases we’ve seen that they were perhaps a few more people and a few more aggressive people that we might have expected at least six months or nine months ago. So no particular difficulties to report in that area, just one of these ongoing processes that goes on for months in various cases.

Sule Sauvigne – Barclays Capital

Okay. And I wonder geographic figures you just broke out for us in Europe pace is up 1%. How was – what was the comparable number this last quarter?

Bob Lovejoy

You were breaking up a little bit there. I’m sorry.

Martin O’Grady

The comparable last quarter.

Bob Lovejoy

The comparable last quarter Europe?

Filip Boyen

Europe was higher in Q4 but Europe in Q1 2011 was 37% and that has dropped to 36% in this quarter. If we break out the U.K., the U.K. is 12% of our total business compared to 13% last year.

Bob Lovejoy

I think she was asking the pace.

Filip Boyen

(Inaudible)

Bob Lovejoy

Just a second. I’m not sure we really completely understood that, Sule, because you’re breaking up as you asked the question and I apologize.

Sule Sauvigne – Barclays Capital

I apologize. I’m on my cell phone. I’m sorry. I was just asking how that Europe up 1% that pace number that was given, how that changed since last quarter, if you can provide that?

Bob Lovejoy

Okay. I don’t know if whether we have it here but that was not what Filip was talking about. Go ahead.

Sule Sauvigne – Barclays Capital

Okay.

Filip Boyen

The base in Europe has dropped slightly because of major softening, a little softening in the U.K. market especially. You know that with the Olympic Games there is various advertising campaigns in the U.K. or U.K. not for U.K. citizens not to travel abroad this year and to stay in the U.K. for their holidays. However we are expecting that a lot of people will want to travel because I think the Olympic Games will cause serious disruption in London.

Martin O’Grady

The pace is also rooms’ revenue, which is achieved and on the box in dollars, and since the last time we spoke I think the Euro has weakened a bit as well which has impacted the figure.

Sule Sauvigne – Barclays Capital

Okay. Thank you. Just one more; I think you mentioned when you were talking about the booking window being shorter this year, I think I heard someone say that you expect strong quotes in bookings. I just wondered what gives you confidence in that because you’re talking about softening demands in Europe and you’re saying you expect strong quotes in bookings, unless I misunderstood.

Bob Lovejoy

I think that was Filip that was talking about that, and he was really referring to the fact that we had already in the course of the year and over the last several months seen a fair amount of quite last-minute bookings, and this we have seen in the past as well for the European properties. Filip?

Filip Boyen

This continues. I mean this has been increasing or the booking window has been shortening over the last two, three years, and I think it has to do with insecurity that currently happens in Europe.

Sule Sauvigne – Barclays Capital

Okay. All right. Thank you. That’s it.

Operator

From Deutsche Bank we will our next question from Carlo Santarelli. Please go ahead.

Carlo Santarelli – Deutsche Bank

Good morning, everyone. I was hoping maybe you can give us a little bit of an update on the status of the half a dozen or so assets that you guys have up for sale and maybe comment a little on the color of some of those discussions and how they’ve changed over the last few months.

Bob Lovejoy

I’m sorry to say that we do not comment on specific asset disposition processes that are under way. That’s just not something we can get into.

Carlo Santarelli – Deutsche Bank

Understood. And then would you guys mind just a little bit on Europe, if you wouldn’t mind talking about as you looked back, Bill, some of these rooms and maybe pockets where you’re seeing some of the softness, how you guys think about rate integrity on a go-forward basis?

Filip Boyen

Rates will, with the exception of the Grand Hotel in Europe where we had to increase our revenues and we had to reduce our rate slightly, that was quite successful because we increased occupancy by four points. We stick to our rates. This is continuing to be our strategy. We see that bookings in Italy are very strong from June onwards, and bookings at La Residencia are slowly starting to happen, so we see no reason at all why we should not stick to our rates in the high season. So we’re very positive there for the summer season.

Carlo Santarelli – Deutsche Bank

Great. Thank you.

Operator

(Operator Instructions) Our next question comes from Richard Stone from Reuben Brothers. Please go ahead.

Richard Stone – Beuben Brothers

Thank you. I’ve just got a few questions which I’ll quickly run through now. First one on Keswick Hall, much, and I know you just touched on this, but can you just confirm that the money has actually been received from the sale. I didn’t see it reflected in the statements. The second question was just on the overheads which seem up by about $1 million, just over $1 million. Is that an increase that’s going to recur?

Is it going to be a full $1 million in the year? And then, another quick question on the El Encanto. You mentioned, can you just confirm how much more debt is required and what impact that’s going to have on the overall debt EBITDA ratio? And the very last question is, with regards to the $68 million debt due to be repaid in the next 12 months, can you just maybe say how that will be apportioned, whether it’s partially going to be paid from the unrestricted cash that you’ve got, and then how else it’s going to be repaid? Thank you.

Martin O’Grady

Well, the Keswick proceeds were received, and have been banked. The central costs are up on the first quarter last year, but they’re slightly down in the fourth quarter of 2011 and I would say that circa $9.5 million is the run rate that I see for the remainder of the quarter of this year. On El Encanto, we’ve got about $49 million, $50 million left to spend, of which about $42 million or so will be funded by the drawdown of the construction finance facility for El Encanto.

And then final question was the net debt EBITDA, yes of course it will be affected in the short term because you’ll have an additional $45 million of debt and we won’t see that asset stabilizing until about $6 million or $7 million, three years down the track. And the final question, also on the repayment of the amortization of the other debt will be funded from the unrestricted cash flow, restricted cash is restricted, so that won’t be used to pay down. The other debt will be funded through cash flow from operations and the cash balances that we have.

Richard Stone – Beuben Brothers

Okay. Thank you.

Operator

Thank you. We will now take our next question from Josh Etas from Citigroup.

Josh Etas – Citigroup

Thanks, good morning. Could you remind us what percentage of your overall business is on the books today, for the summer, and what percentage of the overall business was on the books when you reported last quarter, just so we can put the 6% and up 80% into perspective?

Filip Boyen

If I can shed some light on that first starting with Q2 our booking phase is very good for North America. We’re up 16%. Asia is up 9%, South America is up and the rest of the world is up 8%. That includes of course South America and we’re slightly down in the euro zone about 3 points especially because of the weakening euro and then if I can go to Q3 North America very strong, up 17%. Asia is currently a bit struggling but we’re not too worried about. It’s down 3%. South America is also sluggish but that is driven by a shortage of groups in the Monasterio and the Miraflores Park; and the rest of the world therefore is down 6% or 4% to 3%. And summer bookings in Italy as I already said are strong and they are up 8% predominantly in Sicily.

Bob Lovejoy

Josh, in response to your question, what percentage of overall business for the year is on the books as of now, we’ve got a number in the high 50s. I think the last time we looked it was 58.

Martin O’Grady

53% for the hotels and 56% for owned properties, owned and joint venture 58%.

Bob Lovejoy

And bigger for them.

Martin O’Grady

So that’s...

Bob Lovejoy

Overall.

Martin O’Grady

Yup.

Bob Lovejoy

But what was the number the last time we reported? Do you have that here?

Martin O’Grady

I don’t have it. We’d have to check back to the last transcripts.

Bob Lovejoy

We can give you a yell but that should be covered in the last transcript. If you’d like us to call you back, Josh, we’d be happy to.

Josh Etas – Citigroup

And just the traditional booking just so we get a sense, the traditional booking pattern is by the time you get to the end of June you should be pretty much fully booked for the summer? Is that the right way to think about it?

Bob Lovejoy

No. More or less for the summer, yeah.

Martin O’Grady

But July and August and then September you get people I guess people will be going on vacation after the schools have gone back to holiday and that crowd must be probably more short-term in nature and they’ll be looking at the weather patterns, et cetera, which is generally good in September. So it’s more at the beginning of the third quarter. We’d be fully booked by the end of the second quarter.

Josh Etas – Citigroup

I guess what I’m trying to figure out is based on where you sit today how much visibility do you really have into the summer and it sounds like you’re seeing some pockets of softness but I guess there’s still a potential for that to get better or worst or when you look at that up 6% number how much does that really tell you about how the summer will actually shape up? And then maybe when you think about prior years and where you’ve been at this point is it a good indication of how you actually end up by the time you get to October? Or can a lot change between now and October?

Bob Lovejoy

Well, keep in mind of course that up 6% is hotels; up 10% is all properties at this time. We normally do see quite a lot of, as Filip said, very relatively short booking window demand that materializes for these traditional summer holiday seasons. The bookings at some of our Italian properties, which of course have a significant impact on our overall performance, are running in a very, very positive way particularly for Sicily which to me indicates that there’s a pretty solid number of people who want to go to vacation in Italy.

We normally hear from them right on through the major portions of the summer, in July in particular – excuse me, in June in particular but continuing into the season. So I think the realistic view is that the 6% is probably not the whole picture yet, but I don’t want us to get rose-colored glasses on and start promising stuff that we don’t yet have on the books. For our booking numbers we only use confirmed on-the-books reservations not subject to cancellation.

Josh Etas – Citigroup

And could you remind us traditionally what percentage of your European summer business has been from European travelers versus international?

Filip Boyen

Okay. The geographical breakdown if we take Europe including the U.K. as a total percentage of our business, revenue that is, it’s 36% this quarter against 37% last quarter. If we take the U.K. out the U.K. represented last quarter in Q1 2011 represented 13% of our total business, and that has dropped to 12% this year.

Josh Etas – Citigroup

Okay. So the European component is only a third of the overall business in Europe?

Filip Boyen

Yes. The European component is 24% and the U.K. is 12%, so if you put them together it’s 36%.

Josh Etas – Citigroup

When you think about historically over the past 10, 20 years, have you had success, when there’s softness in Europe, being able to increase the number of rooms sold to international travelers? Have you had that flexibility and have you had – is there enough deficit in the international demand that when you’ve seen softness in Europe historically you’ve been able to kind of make up for it with demand elsewhere?

Filip Boyen

Yes, we do, because I think we’ve made very good progress there. Our Asian market is up 1%, from 8%to 9% in Q1 2012 compared to 2011, and also our South American market is up more than two points. It’s now 11%, and that’s where we have compensated for the loss in the European markets. South America now is predominantly driven by the Brazilian business in the Copacabana and Cataratas is now practically the same as the U.K. components. As I said earlier, we’ve now opened sales representation offices in Dubai. We’ve doubled our sales force in Brazil. We’re reaching out to India as well. We are rally taking advantage and developing the emerging markets.

Martin O’Grady

Bear in mind another dynamic, Josh, which is the 6%, which is on the books now, reflects the weakened euro. You’ve got euro revenues on the books that translated to fewer dollars. The offset of that, and it’s broadly a wash I always felt, is that it should stimulate increased outbound demand from the United States because they see it being a cheaper place and a cheaper destination to visit, but that will come through later.

Josh Etas – Citigroup

Okay. Thank you very much. That’s helpful.

Operator

(Operator Instructions)

Bob Lovejoy

Thank you very much, operator. I guess if there are no further questions we can say thank you very much to everyone for joining us. We look forward to speaking with you soon.

Operator

That will conclude today’s conference call. Thank you for your participation, ladies and gentlemen. You may now disconnect.

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