Seeking Alpha
We cover over 5K calls/quarter
Profile| Send Message| ()  

Executives

Pippa Isbell – Vice President Corporate Communications

James B. Hurlock – Non-Executive Chairman of the Board

Paul M. White – President & Chief Executive Officer

Martin O’Grady – Chief Financial Officer & Vice President Finance

Edwin S. Hetherington – Vice President, General Counsel & Secretary

Analysts

David Katz – Oppenheimer & Co.

Amanda Bryant – Merrill Lynch

Michelle Ko – UBS

Joseph Greff – Bear Stearns

[Sajid Manhar] – CNBC

Chris Woronka – Deutsche Bank Securities

Unidentified Analyst

Patrick Donnelly – BlackRock

Robert Ray – Centurion Investments

Orient-Express Hotels, Ltd. (OEH) Q1 2008 Earnings Call May 8, 2008 10:00 AM ET

Operator

Welcome to the Orient-Express Hotels 2008 first quarter earnings conference call. At this time all participants are in a listen only mode. They’ll be a presentation followed by a question and answer session. (Operator Instructions) I must advise you that this conference is being recorded today, Thursday the 8th of May, 2008. I would now like to turn the conference over to your speaker today Pippa Isbell.

Pippa Isbell

Good morning ladies and gentlemen. As the operator indicated this is the first quarter earnings conference call for Orient-Express Hotels. Last night in New York we issued our news release and it’s available on our website at www.Orient-Express.com as well as on the website of the SEC. For anyone who hasn’t seen it yet, the highlights are as follows. First quarter total revenues of $119.9 million, up 23%. Same store RevPAR up 14% in US dollars, 12% in local currency. EBTIDA of $16.4 million up 18% over prior year. First quarter net loss from continuing operations of $2.4 million compared with a net loss from continued operations of $2.5 million the prior year. EPS loss from continuing operations of $0.06 per common share, adjusted EPS loss of $0.09 per common share. You will see that we provided more depth on regional performance in the release this quarter including more detailed analysis of revenues, costs and profitability. We’ve also made comments in the press release about certain caption balance sheet items on which we previously commented verbally.

On the call today are Jim Hurlock, Chairman of Orient-Express Hotels, Paul White, President and Chief Executive Officer, Martin O’Grady, Chief Financial Officer and Ned Hetherington, Company Secretary to whom I will now hand over for the usual housekeeping matters.

Edwin S. Hetherington

Good morning everyone. I’m the general counsel and company secretary as Pippa indicated of Orient-Express Hotels. I’d like to deal with our usual housekeeping matter before we get started and that’s our cautionary statement under the Private Securities Litigation Reform Act of 1995. 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 from 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 today’s news release, the company’s latest annual report to shareholders and the filings of the company with the Securities & Exchange Commission.

That’s all I have, I’ll now turn the call over to Paul White.

Paul M. White

Good morning everybody. The question I’m being most frequently asked today is how is Orient-Express fairing in the current trading environment followed by an immediate follow up comment, I suppose your clients are immune and hence you are not impacted. Well, back in September, 2007 shortly after taking the helm at Orient-Express Hotels I gathered the senior management team together to formulate our go forward strategy. The first and most important part of this, particularly for any company trading in today’s uncertain environment is to focus on core business. For Orient-Express Hotels this means maximizing the returns from our 50 or so businesses around the world. This is the key role and objectives of our nine regional managing directors around the globe.

For me and for the management team one of our key achievements in the first quarter was to see our total revenue grow by 23%, almost double the rate of growth of same store RevPAR which grew at 14%. Whilst we are only in early May, it is clear that 2008 is evolving pretty much as expected. There are some areas of the world that are seeing unprecedented growth, the Grand Hotel Europe in Saint Petersburg showed revenue growth of 52% in the first quarter and followed this up with 16% in April. The April figure is important because it is same store. In other words the 100 or so refurbished rooms were online by April last year. Our Peruvian properties, our Asian properties and the trains and cruises portfolios are currently forecasting to have record years.

We have however, identified some areas of concern in certain geographic areas. We have been predicting a slowdown in the appetite of the US international traveler to traveling in the shoulder seasons and it is clear that the expected trend is happening. The months of April, May and October are looking at little softer than in previous years. The dual impact of a strong Euro and the lack of consumer confidence appear to have driven this with Italy feeling it the most. It is true to say that this is essentially as expected and has been for a while built in to our guidance. Our commitment to focus on all aspects of revenue, a key objective for the company moving forward, should see any further RevPAR contraction compensated for in overall revenue turns. As in the first quarter, this will impact the ability to grow the margins but, as I have said on many occasions it’s profits we bank not percentages.

Short break business out of the UK is down versus 2007 and this is driven by a weaker UK economy and also strong Euro versus the UK Pound. This will have an impact on the Euro’s own hotels. Currently the more resilient economies of Germany, France and Eastern Europe are showing good growth and filling this hole. We expect this to continue in to 2009 and are redirecting our marketing efforts accordingly. The pleasant surprise is the predicted slowdown in US domestic demand has not impacted Orient-Express. Overall, group bookings are slightly down over previous years but this is being more than compensated by FIT and corporate transient demand. It is clear that the US customers is more inclined to spend their dollars in dollar denominated areas which for Orient-Express means spending at home in the United States, in Asia and in South America.

Let’s look at the bookings outlook. All of the numbers I will give are same store and they are on a rolling 12 month basis. In Europe, on a rooms let basis we are currently tracking 2% points behind the same point in 2007. This data is as of 30th of April. The high season, that’s the third quarter for us is 7% ahead with the fourth quarter 3% ahead. On a revenue basis the second quarter is tracking 16% ahead in US dollars. The US region which includes Central America and the Caribbean, bookings are tracking 5% ahead versus the same period in 2007. The third quarter again dominates with bookings 17% up. Interestingly, the US domestic hotels Inn at Perry Cabin, Keswick Hall, The Windsor Court in New Orleans and Charleston Place are driving this.

In Asia, bookings are well ahead, 10% for the next 12 months with the third quarter up 15%. We are all saddened to hear of the awful events in Burma the results of Cyclone Nargis, our company and more relevantly our employees have lived through Katrina, Wilma, Emily and Rita in the US and Mexico and we are doing what we can in difficult circumstances to support our employees and families in such difficult times.

In the rest of the world overall bookings are tracking 2% ahead of prior year for 12 months with the key driver being the fourth quarter, the start of the southern hemisphere high season where bookings are currently over 20% up. But, I have to say it’s very early days. Trains and cruises bookings on a revenue basis are 11% ahead of prior year with 78% of budgeted revenue for the year confirmed. The main driver here is the Venice Simplon and the Orient-Express.

It is clear that the two markets which drive business in to our hotels, the United States and UK are experiencing downward pressure. Combined, these markets account for over 50% of our international business and are key to the future well being of Orient-Express. Our focus on maintaining market share from these regions if of prime importance. At the same time we continue to explore new opportunities with sales presences recently set up in South Korea, San Paulo and Moscow.

Cost control is always been an important tool in managing such a diverse portfolio and yes, like many other companies we are cutting staffing levels in some operations particularly in the low season on property and where possible in central functions. But, it is prime importance that we keep to our marketing plans. Our commitment to providing the highest level of product and service means that maintenance cap ex also remain unchanged. I will repeat, maximizing all revenue opportunities will see our company and indeed our industry ride the storm. It is vitally important that hotel guests see restaurants, spas and other hotel facilities as places they want to experience and that we keep them on property. All this leads to our guidance remaining unchanged with EBITDA pre-real estate remaining in the $160 to $170 million range. For clarity, we expect this figure to be in the $50 to $53 million range for the second quarter assuming exchange rates stay at current levels.

Turning to real estate; those of you who have read the earnings release will have seen a prudent approach to the release of earnings that has been adopted for the Cupecoy Marine project. There are good reasons for this, I must point out that the overall projections for revenues, costs and hence profits for this project essentially remain unchanged. The key events in the last few weeks include the removal of the local brokers who basically did not perform to expectation and we are delighted that S&P Real Estate have agreed to join with us and they have already mapped out a clear vision on sales which should see 60 units sold during the 2008/2009 selling season. The project remains on target for final completion in mid 2009. On S&P’s advice we’ve had the opportunity to reconfigure approximately 10 units to create a better final product top end focused and this will involve us repurchasing three or four of the units.

In St. Martin on the French side we have taken the decision to put the four villas that are scheduled for 2008 completion in to hotel inventory to ensure that we get an immediate return on these villas. We will continue to market the villas for sale but should market conditions work against us, the hotel will benefit from the incremental revenue and profit. S&P are currently working with our real estate teams on evaluating our potential projects in Mexico, Lisbon, San Michele, Madeira and Asia. This process will be complete by early June and only at that point will we give updated guidance. We are not currently forecasting any significant release of earnings in the second quarter.

Moving on to acquisitions and new opportunities. As expected, we are seeing the beginnings of movement in this area. In the past two months we have been approached regarding a number of very interesting opportunities in all parts of the world. In Europe, as well as the announced possibility in Puglia in Southern Italy. We are in discussions on possible acquisitions in Greece, Australia and Russia; early stages but interesting possibilities. In Central America we have recently completed due diligence on a couple of interesting opportunities. We are also pursuing properties in Ecuador, Cambodia and the United States.

On our existing properties under refurbishment, I’ve recently just returned from Brazil where the refurbishment of Hotel Cataratas will commence in two weeks time. The project will be split in to three phases with the first 77 of the 200 hundred rooms coming on stream in January, 2009. Phase I will also include a new Churrascaria, that’s a Brazilian barbeque restaurant, a new spa and pool. Phase II which includes the suites and the main building will come on line in May, 2009 with a total $30 million refurbishment complete in late 2009. I also recently visited the Royal Chundu Lodge in Zambia, a phenomenal destination and a perfect fit with our Botswana accounts. The Lodge due for completion in early 2009 will comprise 13 luxury over water lodges with views across the Zambezi River and a private island where we can build four luxury suites. And, the bonus, it’s only half an hour from the Victoria Falls.

I would now like to hand it over to our Chief Financial Officer Martin O’Grady.

Martin O’Grady

Good morning everyone. As Pippa mentioned at the start of the call, we have given more information in the press release this quarter so I would like to direct you there for the detailed results. I would however like to address the important issue of liquidity. At the end of the quarter we had cash of $102 million plus an additional $35 million of funds available under working capital on revolving credit services. Additionally, we have arranged but not yet drawn $120 million of construction finance for our projects at El-Encanto, Cupecoy, Cataratas and [inaudible]. With respect to our financial commitment and our 21 Hotel in New York City, I have started to presenting to banks mostly in the non-US based in order to arrange construction financing. Early feedback has been positive.

Including our cash balance, our net debt at the end of the quarter was $746 million and on a trailing 12 month basis our EBTIDA ratio was 4.8 times. The weighted average maturity of this debt was nearly four years. Our current portion of long term debt was $132 million. This included $90 million of borrowings under revolver facilities which are technically repayable in 12 months but in reality will be rolled over as they mature. The current portion of our long term debt also includes $47 million relating to a loan secured on Windsor Court in New Orleans in what has been a difficult local market and now even more in challenging financial climates, I’m pleased to report that this loan was successfully renewed in April for a further five year term and within an increasing margin of only 25 basis points. I believe this largely reflects the excellent relationships that Orient-Express enjoys with its banks and the confidence that our banks have in the Orient-Express, both of which are critical in these times of reduced liquidity.

At the end of March approximately 81% of our debt was floating. In April we decided to take advantage of the low level of US LIBOR and fixed our interest costs on an additional $150 million of US dollar borrowings. Our floating rate debt is now approximately 63% of total debt.

I’ll now pass you back to Pippa.

Pippa Isbell

I will hand you back to the operator so we can take your questions. In the interest of time could I ask you please to limit yourself to three questions each. Thank you operator.

Question-and-Answer Session

Operator

(Operator Instructions) Our first question comes from the line of David Katz – Oppenheimer & Co.

David Katz – Oppenheimer & Co.

Can we perhaps, have we gotten to where we can quantify some of the impact for the Tycoon on this year? Help us figure out what to do with our models based on it?

Paul M. White

Are you referring to the Cyclone in Berma?

David Katz – Oppenheimer & Co.

Yes.

Paul M. White

The way we’re thinking at the moment is obviously on the hotel side we’ve not accessed the damage but the pictures we’ve seen and the calls we’ve received is there is not a great deal of structural issues, there are a lot of trees down. So, I don’t think that has any impact on the models whatsoever. The key issue is what’s going to happen with the ship. If you remember, when we sort of put our guidance out at the beginning of the year Berma was undergoing a different type of strife so we actually have minimal earnings factored in to the numbers that we gave out from Berma. So, I don’t think this is going to have a great deal of economic impact on the company, it’s more the impact that it’s having sort of on employees, etc at the moment. And, obviously, we are well insured as you would expect us to be. We’ve got marine insurance for the ship and the normal insurance that we have for the company for the hotel. It’s probably a little early for me to comment further than that at the moment as to what the impact might be on 2009 until we really have a proper assessment of the damage to the ship.

David Katz – Oppenheimer & Co.

Just one other question, we look at the European business, one of the ways because you’re an asset owner we’ve perceived somewhat of a currency hedge from the perspective that your revenues and expenses are matched in the same currency. So, we see some of the movement in currency and I guess we were a bit surprised by some of the difference in movement among revenue versus EBITDA. What am I missing?

Paul M. White

Well, I don’t think you’re missing anything. The bottom line is the Euro has strengthened considerably and our Italian hotels are closed in the first quarter. The Italian hotels, like any hotels have cost inflation so in Euros the loss will have gone up by 3% or 4% but in dollars, that loss is even more enhanced. Then, that is offset in our European results by the Grand which have a functional currency which is the Ruble essentially dollar based and obviously the results of the European hotels that are open. I think really when you look at Q2 and Q3 the whole margins issue start to come through a lot clearer. What I will say is if we continue to see the increase in the proportion of food and beverage and spa revenues versus rooms revenues that will make it more difficult to grow margins but it will see EBITDA growth coming through stronger.

Operator

Your next question comes from the line of Amanda Bryant – Merrill Lynch.

Amanda Bryant – Merrill Lynch

Given your announcements for the hotel in Italy and the small property in Zambia what should we be modeling for total cap ex spend in 2008? Then my next question would be would you mind giving us, I think I missed it before, your forward bookings for rest of world?

Paul M. White

Let me go back to the forward bookings for the rest of the world. Overall, 2% up for the next 12 months, Q4 is 20% up. Let me give a little bit more color, we’re 4% up for the third quarter which is the low season quarter. Overall, we’re tracking a little bit ahead of this time last year. On the cap ex, what we are obviously continually trying to do is ensure that we are spending the cap ex in the correct areas so overall maintenance cap ex remains unchanged. The combination of the Zambia project will probably involve approximately $4 million of initial investment plus another $8 or so of cap ex to finish the project off and to get it open in early 2009. The Italy investment is a 50% equity investment and the equity that’s going in because this project is well financed is somewhere in the $10 million range.

Operator

Your next question comes from the line of Michelle Ko – UBS.

Michelle Ko – UBS

I just wanted to go over the guidance a little bit. Thanks for giving us the guidance for 2Q, I believe you said it was $50 to $53 million. That looks roughly in line with last year so if you’re still expecting $160 to $170 for the year are you weighting it more towards the third quarter since the fourth quarter is usually a lower period?

Paul M. White

Michelle, what I’ve been saying for the last six or seven months in fact, I relay this back to the very first meeting I had which was with Maurizio Saccani, he runs Italy when I took over. An, Maurizio sort of said to me, “Look Paul, the high season is going to be fine but I’m worried about the shoulder seasons.” If you look at our bookings yes, our Q3 is looking very resilient and very strong and you know, I think that’s what many would expect because it is Q3 when we have the top spenders coming in to our Italian properties, in to our properties around the world in the northern hemisphere. It is the shoulder seasons which really is May and June and October that we are in the same boat that many of the other lodging companies are in that those are the harder ones to fill particularly when you’re focused on the ledger side of the business. Overall, there probably has been a slight shift from Q2 to Q3 but our Q3 at the moment is looking very strong.

Michelle Ko – UBS

Then another question is I just wanted to see if you were still on track to spend $46 million in cap ex for the New York City development in the third or the fourth quarter of this year?

Paul M. White

Yes, that is scheduled for 31st October basically. That project is moving ahead very well and I hope to be able to give you guys a little bit more color on that in June when we’re on the road in the US.

Michelle Ko – UBS

I’m sorry I missed this when you were first talking about it but you said your US and your UK was what percentage of your business?

Paul M. White

Just over 50% of our international business so take out Americans for America and British for the UK.

Operator

Your next question comes from Joseph Greff – Bear Stearns.

Joseph Greff – Bear Stearns

Paul, I don’t know if you mentioned the real estate earnings for full year 08? I know you said there would be zero recognized in the second quarter, did you talk about what you’re expecting for the full year?

Paul M. White

No, what I said was we’re about three quarters of the way through the evaluation that S&P and my own team are doing and what I am intending on doing is coming out probably in the next sort of month to month and a half with some formal guidance when I’ve completed that exercise.

Joseph Greff – Bear Stearns

Going back to 2008 operating EBITDA, when you look at your composition of EBITDA within the owned hotel segment do you basically see Europe flat year-over-year with North America and rest of world up? Is that how you’re thinking about it?

Paul M. White

No, I think we are going to show some growth in Europe but, as I just said to Michelle on the previous question, it is very much going to be driven by the third quarter. I think we had anticipated most of what is happening at the moment. We probably hadn’t anticipated the strength of the Euro against the Pound as much as we had against the dollar so from our own point of view when we’re tracking against our internal budgets, Europe and rest of the world is coming out fairly close. The pleasant surprise, as I said is the strength of the domestic US demand which is filling a little bit of the hole from the non-domestic US region. So overall, I think we are going to show some growth out of the European portfolio. Obviously, any movements in the exchange rates could influence that favorably or unfavorably.

Joseph Greff – Bear Stearns

What do you think is driving what sounds like surprisingly strong trends in the US or the North American markets? [Inaudible]

Paul M. White

When I was down in Brazil we just had sort of a big travel agent event with our top producers and a lot of our general managers were there and basically the feeling is, and this is the feeling in the UK as well although it doesn’t impact our company as much, is that a lot of people are choosing to spend their money in their own country at the moment. So, weekends to the Inn at Perry Cabin and to Keswick are doing particularly well and on the conference side I think the choice of maybe taking a conference outside the US versus keeping it inside the US is benefiting New Orleans and Charleston. Actually, just speaking to my friends in the industry here in the UK, that’s the feeling of the UK operators as well that people are more inclined to spend their money in their own currency denominated areas rather than in Euro areas because of the strength of the Euro.

Operator

Your next question comes from the line of [Sajid Manhar] – CNBC.

[Sajid Manhar] – CNBC

I just wanted to know has the other group of the Indian hotels made any kind of revised bid for a strategic alliance with Orient hotels?

Paul M. White

I will answer the question but I would ask you in future just to get a hold of our press office. The answer is a straight no, there has been no communication on that subject.

[Sajid Manhar] – CNBC

Would you consider communication in the future?

Paul M. White

I think my telephone number and my email address is on our website.

Operator

Your next question comes from Chris Woronka – Deutsche Bank Securities.

Chris Woronka – Deutsche Bank Securities

Paul could you just review how what you said a little bit earlier about Europe’s booking pace. I think I got all the data points, I’m just trying to bridge how it’s going to flow through the year. It sounds like second quarter is a little bit slower than obviously the third and maybe how do we end up in the fourth? I’m just trying to get all those booking numbers to add up.

Paul M. White

I think you’re spot on with what you said in your summary. As I said, the third quarter in terms of actual bookings is 7% up at the moment, the fourth quarter is 3% up. How do I expect this to pan out? Eventually I think there will be revenue growth. I think it will be more rate dominated than occupancy. That 7% is more likely to translate in good rate growth rather than actually in volume growth. It puts you in a much better position, particularly in our Italian hotels to have the bookings on the books before we sort of get close to the high season. Again, talking to my managers in Russia and in Spain they’re sitting on quite good numbers at the moment but do expect those to translate those more in to rate than in to occupancy. And of course, if it translates to rate that’s much better for the whole margin translation and EBITDA translation.

Chris Woronka – Deutsche Bank Securities

You mentioned that one of the other issues in the first quarter, especially on the margins was kind of the mix of higher ancillary out-of-room revenues. Can you quantify that at all?

Paul M. White

Well, yes I can. Rooms revenue tend to convert at 70% to 75% even 80% in some of our properties whereas food and beverage revenues will tend to convert at 15% to 20%. So, in a property like the Copacabana Palace for example, where we’ve had a big uplift in function revenues, social events, etc. you can increase your EBITDA by $1 million but actually not two or three points off of your margins. The other thing is where we have introduced new spas, obviously we get the extra revenue from the spas but the spas generally convert somewhere between 25% and 35% so the marginal revenue is converting at a slightly lower number than the core rooms revenue. So when you look at something like the Mount Nelson where we’ve put the new spa in, by the end of this year actually I think we’re projecting a margin on the Mount Nelson of about two percentage points lower but, an increase in revenue because of the new spa.

Operator

Your next question comes from Unidentified Analyst.

Unidentified Analyst

Just a quick question, there seems to be a good deal of confusion Paul as we’ve spoken about in the past, just about trying to assign some valuation to the real estate portfolio. And, it seems like management is making a conscious effort and at the analyst day last year at the 21 Club I think a lot of people left scratching their head as to what kind of valuations and appraisals have been done. Is there a way that you can provide some granularity either through an 8K or a presentation? Is there some really property by property assessments of what those valuation and appraisals are?

Martin O’Grady

We agree, it is difficult for you guys to model real estate earnings considering how lumpy they can be. What we’re thinking about and what we’d like to get to although it takes a bit of effort to get there and indeed what we have started to do is split and make it much clearer that you’ve got your EBITDA before real estate and then you’ve got your separate real estate component. Clearly, you’re going to have your multiples that you’re going to want to put on the operational EBITDA with the real estate what I think we need to do is help you by providing some kind of [NAV]. I’m not quite sure exactly how we’re going to produce that in the 8K or the 10K but that’s where I’d like to end up with some kind of [NAV] statement. But, it will take a long process to gather all the numbers together and get the right operations in.

Paul M. White

I agree. We are going to be out on the road a couple of times. We’ve committed to a couple of the conferences in the US in New York and in Boston. I hope certainly by the time we’re up in Boston in July that we’ll be able to come out with something much more definitive on the real estate side. We are working, and I personally actually am working quite hard on this area of the business at the moment. Just like I said back in November last year, we do believe in the future of the business. Obviously, there’s a softness in the market at the moment but we will, it is my intention to give more clarity.

Unidentified Analyst

If you back out all the book of just the hotel properties and you’re left with the independent real estate developed and undeveloped, what are the most recent appraisal value of that property?

Martin O’Grady

I wouldn’t like to comment on that because a number of the analysts that are on the call have done their own appraisals of it. I think that we will complete the exercise that we’re doing and we’ll come out with a statement when we’ve gone through that exercise.

Unidentified Analyst

Do you think that the street is relevantly close if you take a consensus number? Or is it that hard to decipher even for you at this point that it’s not even possible to ascertain if that’s true.

Paul M. White

I think the streets have a good understanding of what we’re doing. The street will only react to the information we give out, they don’t sort of make things up themselves so it’s up to us to give a better quality of information to enable them to refine their models.

Operator

Your next question comes from the line of Patrick Donnelly – BlackRock.

Patrick Donnelly – BlackRock

Can you give us an update on potential assets sales? You’ve mentioned in the past some non-core assets were on the docket to be sold. Obviously, the credit markets may have delayed this. I’m coming at this question from a point of view that the stock doesn’t accurately reflect the intrinsic value of the hotel assets so I was hoping that core and even non-core assets could potentially be sold, valuation highlighted and realized and perhaps used to buy back stock or to hedge weight the growth model.

Paul M. White

I’m glad that the question has come up actually. Obviously, what we are focused on as I alluded to in the last quarter call is really non-core assets. One of those is being publically marketed at the moment, another we’re in private negotiations on. I think the way we are thinking at the moment is if we can get good prices for non-core assets, and let’s face it we do tend to sort of think, “Oh well the property market in the US is depressed.” Or, “The property market in the UK is depressed.” But, there are areas of the world where the property market is still doing very well, we will try to take advantage of that. As to how we use the proceeds, I think it’s probably the second suggestion that our board is more focused on than the first which is to use that to asset in fueling growth. In the last cycle we took advantage of certain opportunities that came our way particularly Russia and Spain and the UK. It’s something that the development team are very focused on at the moment. If at the same time we can sell some assets then it is a subject that is not closed.

Patrick Donnelly – BlackRock

The buyers I’m guessing, the best buyers are the ones that are the most aggressive still would be those that are cash rich and that brings up a Dubai or an Indian hotel group or someone like that. Would you have discussions with those types, not specifically them but others like them that may want to buy one of your call it trophy assets where you could sell the asset at a very good price and still remain on a long term management contract? Then again, perpetuate the growth model through buying up something like the [Pancia] portfolio where it is unstabilized and you guys can add a lot of value?

Paul M. White

I think, and again Patrick you and I have spoken about this before, I think there are certain properties that are very core not just to our earnings but to our culture. Our Italian portfolio I think is very sacrament to us but, other properties, you know we do get sniffs of interest on them from time-to-time. Where are the potential buyers? You mentioned there is a lot of cash in the Middle East and India, there is also a lot of cash in Asia at the moment. Who is willing to pay the real premiums I think you do come back to private individuals, rich families at the end of the day that are the ones that would engage on a high premium basis. But, there is no door that is closed at the moment.

Operator

Your next question comes from the line of Chris Woronka – Deutsche Bank Securities.

Chris Woronka – Deutsche Bank Securities

Paul could you just comment on whether some of the other acquisition opportunities that you have kind of completed due diligence on whether there’s any possibility that those might be actionable this year or any idea on potential timing?

Paul M. White

Yes, there is a possibility that a couple of them will be actionable this year and will be on existing assets, in other words not development. I can’t say much more than that, sorry Chris.

Operator

Your next question comes from the line of Robert Ray – Centurion Investments.

Robert Ray – Centurion Investments

First of all I’m sort of baffled that the stock is coming down so much today because basically what I’m understanding that you’re saying is that business is pretty much as you expected more or less. But, what I don’t, one thing that you said a while ago was that there may be a real change in the valuation of the markets of luxury properties. Are you seeing that in the last six weeks? Is there a change going on? Is the currency affecting that with the big change in the dollar value? Are you seeing a lot more things to look at than you saw six months ago or not yet?

Paul M. White

I think the reason why we are starting to see some movement is what Martin alluded to is the whole liquidity issue in Europe. It is that there are some funds that were set up, there were some private individuals that are going through the whole refinancing at the moment and that is what is persuading them to maybe consider offloading. I don’t think there’s anything in business fundamentals in Europe that is necessarily driving it. That may be the case if things continue as they are for another year or so. If as you say the stock is coming down I too am a little baffled because with the exception of what we’ve talked about on real estate which is just a timing issue, I think our results were pretty much as expected from ongoing operations if not slightly better.

Robert Ray – Centurion Investments

My understanding is that we want to be buyers, that we really don’t need to sell any assets to buy assets here.

Paul M. White

Oh, absolutely.

Robert Ray – Centurion Investments

So the banks may end up offering you hotel properties in the next six or nine months that they take back or are you not seeing that yet? It hasn’t gotten to that?

Paul M. White

No, it hasn’t gotten to that. I think there has been one example of a property state side that was offered to us by a bank but otherwise no it’s mainly people are taking the leap before their pushed in that respect.

Robert Ray – Centurion Investments

And finally, I mean if you wanted money you could get money. You have plenty of availability any number of ways, is that correct?

Paul M. White

Yes. I mean, we have opportunities to raise on balance sheet or off balance sheet money.

Robert Ray – Centurion Investments

So you can react to anything you want?

Paul M. White

Yes. I mean again, I think the key thing that Martin eluded to is that in these situations your actual relationship with your bank is of prime importance and I think over the last seven or eight years developed some good relationships with some very strong lenders on both sides of the Atlantic.

Operator

There are no further questions at this time. Please continue.

Paul M. White

Thank you very much. I look forward to talking to you on the next call.

Operator

That does conclude our conference for the day. Thank you for participating. You may all disconnect.

Copyright policy: All transcripts on this site are the copyright of Seeking Alpha. However, we view them as an important resource for bloggers and journalists, and are excited to contribute to the democratization of financial information on the Internet. (Until now investors have had to pay thousands of dollars in subscription fees for transcripts.) So our reproduction policy is as follows: You may quote up to 400 words of any transcript on the condition that you attribute the transcript to Seeking Alpha and either link to the original transcript or to www.SeekingAlpha.com. All other use is prohibited.

THE INFORMATION CONTAINED HERE IS A TEXTUAL REPRESENTATION OF THE APPLICABLE COMPANY'S CONFERENCE CALL, CONFERENCE PRESENTATION OR OTHER AUDIO PRESENTATION, AND WHILE EFFORTS ARE MADE TO PROVIDE AN ACCURATE TRANSCRIPTION, THERE MAY BE MATERIAL ERRORS, OMISSIONS, OR INACCURACIES IN THE REPORTING OF THE SUBSTANCE OF THE AUDIO PRESENTATIONS. IN NO WAY DOES SEEKING ALPHA ASSUME ANY RESPONSIBILITY FOR ANY INVESTMENT OR OTHER DECISIONS MADE BASED UPON THE INFORMATION PROVIDED ON THIS WEB SITE OR IN ANY TRANSCRIPT. USERS ARE ADVISED TO REVIEW THE APPLICABLE COMPANY'S AUDIO PRESENTATION ITSELF AND THE APPLICABLE COMPANY'S SEC FILINGS BEFORE MAKING ANY INVESTMENT OR OTHER DECISIONS.

If you have any additional questions about our online transcripts, please contact us at: transcripts@seekingalpha.com. Thank you!

Source: Orient-Express Hotels Ltd. Q1 2008 Earnings Call Transcript
This Transcript
All Transcripts