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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

FORM 10-Q

(Mark One)

/x/
Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

For the quarterly period ended September 30, 2001

or

/ / Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

For the transition period from               to               

Commission file number 1-16017

ORIENT-EXPRESS HOTELS LTD.
(Exact name of registrant as specified in its charter)

Bermuda (State or other jurisdiction of incorporation or organization)	98-0223493 (I.R.S. Employer Identification No.)
41 Cedar Avenue P.O. Box HM 1179 Hamilton HMEX, Bermuda (Address of principal executive offices)	(Zip Code)

441-295-2244
(Registrant's telephone number, including area code)

    Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

/x/  Yes               / /  No

    As of October 31, 2001, 28,340,601 Class A common shares and 20,503,877 Class B common shares of Orient-Express Hotels Ltd. were outstanding, including 18,044,478 Class B shares owned by subsidiaries of Orient-Express Hotels Ltd. and 16,865,401 Class A shares and 2,459,399 Class B shares owned by Sea Containers Ltd.

PART I

Orient-Express Hotels Ltd. and Subsidiaries

Consolidated Balance Sheets

			September 30, 2001			December 31, 2000
			(Dollars in thousands)
Assets
Cash and cash equivalents			$	55,334		$	15,889
Accounts receivable, net of allowances of $498 and $422				46,995			45,600
Inventories				17,373			15,950
Total current assets				119,702			77,439
Property, plant and equipment, less accumulated depreciation of $79,957 and $71,159				581,040			548,788
Investments				87,674			66,973
Intangible assets				29,753			30,423
Other assets				2,927			2,253
			$	821,096		$	725,876
Liabilities and Shareholders' Equity
Working capital facilities			$	3,934		$	6,348
Accounts payable				20,939			15,962
Accrued liabilities				35,022			28,556
Deferred revenue				12,242			9,043
Current portion of long-term debt				40,336			53,722
Total current liabilities				112,473			113,631
Long-term debt				303,635			223,051
Deferred income taxes				4,651			5,456
				420,759			342,138
Minority interest				5,029			5,021
Shareholders' equity:
	Class A common shares $0.01 par value (120,000,000 shares authorized):
		Issued—28,405,301 (2000—28,440,601)		284			284
	Class B common shares $0.01 par value (120,000,000 shares authorized):
		Issued—20,503,877 (2000—20,503,877)		205			205
Additional paid-in capital				228,191			228,862
Retained earnings				200,207			173,399
Accumulated other comprehensive loss				(33,398	)		(23,852	)
Less: reduction due to class B common shares owned by subsidiaries—18,044,478				(181	)		(181	)
Total shareholders' equity				395,308			378,717
Commitments				—			—
			$	821,096		$	725,876

See notes to consolidated financial statements.

Orient-Express Hotels Ltd. and Subsidiaries

Statements of Consolidated Operations

		Three months ended September 30,
		2001			2000
		(Dollars in thousands, except per share amounts)
Revenue		$	65,773		$	71,128
Earnings from unconsolidated companies			2,180			2,202
			67,953			73,330
Expenses:
	Depreciation and amortization		4,217			3,813
	Operating		31,368			33,309
	Selling, general and administrative		18,843			17,458
Total expenses			54,428			54,580
Earnings from operations before net finance costs			13,525			18,750
Interest expense, net			(4,898	)		(6,476	)
Interest and related income			—			(66	)
Net finance costs			(4,898	)		(6,542	)
Earnings before income taxes			8,627			12,208
Provision for income taxes			1,126			1,573
Net earnings		$	7,501		$	10,635
Net earnings per class A and class B common share:
	Basic and diluted	$	0.24		$	0.37

See notes to consolidated financial statements.

		Nine months ended September 30,
		2001			2000
		(Dollars in thousands, except per share amounts)
Revenue		$	195,746		$	200,323
Earnings from unconsolidated companies			6,815			5,854
			202,561			206,177
Expenses:
	Depreciation and amortization		12,241			11,234
	Operating		91,700			92,521
	Selling, general and administrative		53,665			52,165
Total expenses			157,606			155,920
Earnings from operations before net finance costs			44,955			50,257
Interest expense, net			(15,020	)		(18,062	)
Interest and related income			377			(48	)
Net finance costs			(14,643	)		(18,110	)
Earnings before income taxes			30,312			32,147
Provision for income taxes			3,504			4,036
Net earnings		$	26,808		$	28,111
Net earnings per class A and class B common share:
	Basic and diluted	$	0.87		$	1.05

See notes to consolidated financial statements.

Orient-Express Hotels Ltd. and Subsidiaries

Statements of Consolidated Cash Flows

			Nine months ended September 30,
			2001			2000
			(Dollars in thousands)
Cash flows from operating activities:
	Net earnings		$	26,808		$	28,111
	Adjustments to reconcile net earnings to net cash provided by operating activities:
	Depreciation and amortization			12,241			11,234
	Undistributed earnings of affiliates and other non-cash items			(2,750	)		(105	)
	Change in assets and liabilities net of effects from acquisition of subsidiaries:
		Decrease/(increase) in accounts receivable		2,188			(5,355	)
		Increase in inventories		(1,614	)		(505	)
		Increase in accounts payable		5,509			12,264
		Total adjustments		15,574			17,533
Net cash provided by operating activities				42,382			45,644
Cash flows from investing activities:
	Capital expenditures			(25,881	)		(29,430	)
	Acquisitions and investments, net of cash acquired			(39,303	)		(44,842	)
	Proceeds from sale of fixed assets and other			394			76
Net cash used in investing activities				(64,790	)		(74,196	)
Cash flows from financing activities:
	Working capital facilities and redrawable loans repaid			(2,127	)		(1,541	)
	Issuance of common shares			—			86,716
	Issuance of long-term debt			98,151			82,918
	Principal payments under long-term debt			(33,031	)		(71,987	)
	Purchase and cancellation of common shares			(497	)		—
	Movement in SCL investment prior to initial public offering			—			(32,903	)
Net cash provided by financing activities				62,496			63,203
Total cash flows				40,088			34,651
Effect of exchange rate changes on cash				(643	)		(713	)
Net increase in cash				39,445			33,938
Cash and cash equivalents at beginning of period				15,889			11,143
Cash and cash equivalents at end of period			$	55,334		$	45,081

See notes to consolidated financial statements.

Orient-Express Hotels Ltd. and Subsidiaries

Statements of Consolidated Shareholders' Equity

		Class A Common Shares at Par Value		Class B Common Shares at Par Value		Additional Paid-In Capital			Retained Earnings		Accumulated Other Comprehensive Loss			Common Shares Owned by Subsidiaries			Total Comprehensive Income (Loss)
		(Dollars in thousands)
Balance, January 1, 2001		$	284	$	205	$	228,862		$	173,399	$	(23,852	)	$	(181	)
Purchase and cancellation of Class A common shares							(671	)
Comprehensive income:
	Net earnings on common shares for the period									26,808							$	26,808
	Other comprehensive loss											(9,546	)					(9,546	)
																	$	17,262
Balance, September 30, 2001		$	284	$	205	$	228,191		$	200,207	$	(33,398	)	$	(181	)

See notes to consolidated financial statements.

Orient-Express Hotels Ltd. and Subsidiaries

Notes to Consolidated Financial Statements

1.  Basis of financial statement presentation

    (a)  Accounting policies

    Orient-Express Hotels Ltd. (the "Company") is a majority-owned subsidiary of Sea Containers Ltd. ("SCL"). The Company and its subsidiaries are referred to collectively as "OEH".

    For a description of significant accounting policies and basis of presentation, see Notes 1 and 13 to the consolidated financial statements in the 2000 Form 10-K annual report.

    In the opinion of management, all adjustments necessary for a fair statement of the results of operations for the nine months ended September 30, 2001 and 2000, which are all of a normal recurring nature, have been reflected in the information provided.

    (b)  Net earnings per share

    The number of shares used in computing basic and diluted earnings per share was as follows (in thousands):

	Nine months ended September 30,
	2001	2000
Basic	30,899	26,776
Diluted	30,907	26,857

	Three months ended September 30,
	2001	2000
Basic	30,898	28,509
Diluted	30,909	28,945

    (c)  Accounting change

    As reported in Note 1(c) to the financial statements in the Form 10-Q quarterly report of the Company for the quarter ended June 30, 2001, the Company adopted with effect on January 1, 2001, the Statement of Financial Accounting Standards ("SFAS") No. 133, "Accounting for Derivative Instruments and Hedging Activities", issued by the Financial Accounting Standards Board ("FASB"), as amended by SFAS No. 137 and No. 138.

    The initial adoption of SFAS No. 133 resulted in an unrealized loss of $1,333,000 in accumulated other comprehensive income (loss) as of January 1, 2001. For the nine months ended September 30, 2001, the change in the fair market value of derivative instruments resulted in a charge to other comprehensive income (loss) of $617,000.

    The components of comprehensive income (loss) are as follows (dollars in thousands):

		Nine months ended September 30,
		2001			2000
Net earnings on common shares		$	26,808		$	28,111
Other comprehensive income (loss):
	Foreign currency translation adjustments		(7,596	)		(7,386	)
	Cumulative effect of change in accounting principle (SFAS 133) on other comprehensive income		(1,333	)		—
	Changes in fair value of derivatives		(617	)		—
Comprehensive income		$	17,262		$	20,725

    (d)  Recent accounting pronouncements

    In August 2001, the FASB issued SFAS No 144, "Accounting for the Impairment or Disposal of Long-Lived Assets", which defines an impairment as the condition that exists when the carrying amount of a long-lived asset is not recoverable and exceeds its fair value. The statement also identifies the circumstances that apply when testing for recoverability, as well as other potential adjustments or revisions relating to recoverability. Specific guidance is provided for recognition and measurement, as well as reporting and disclosure, for long-lived assets held and used and those disposed of. The statement will be effective for financial statements issued for fiscal years beginning after December 15, 2001.

    As reported in Note 1(d) to the financial statements in the Form 10-Q quarterly report of the Company for the quarter ended June 30, 2001, the FASB issued in July 2001 SFAS No. 141, "Business Combinations" and SFAS No. 142, "Goodwill and Other Intangible Assets".

    OEH is currently assessing but has not yet determined the impact of SFAS No. 141, 142 and 144 on its financial position and results of operations.

2.  Acquisitions and investments

    On April 27, 2001, OEH acquired the Bora Bora Lagoon Resort in French Polynesia, a hotel previously managed by OEH, for a cash price of approximately $19,600,000. OEH funded most of the purchase price with bank mortgage finance. The acquisition has been accounted for as a purchase in accordance with Accounting Principles Board No. 16, "Business Combinations". The results of this operation have been included in the consolidated financial results of OEH from the date of acquisition. The proforma impact on results, had this acquisition occurred on January 1, 2001, is not material.

    On January 17, 2001, OEH acquired the Miraflores Park Plaza in Lima, Peru for approximately $17,000,000. The price was paid largely by the assumption of existing debt, with the balance paid in cash and the issuance of notes to the seller. OEH's 50:50 hotel joint venture in Peru has an option to purchase the hotel at cost which, when exercised, will result in OEH becoming the exclusive long-term manager of the hotel.

3.  Property, plant and equipment

    The major classes of real estate and other fixed assets are as follows (dollars in thousands):

	September 30, 2001		December 31, 2000
Freehold and leased land and buildings	$	471,280	$	437,094
Machinery and equipment		109,152		104,335
Fixtures, fittings and office equipment		64,440		62,400
River cruiseship		16,125		16,118
		660,997		619,947
Less: accumulated depreciation		79,957		71,159
	$	581,040	$	548,788

    At September 30, 2001, the balance for machinery and equipment under capital lease was $1,743,000 (December 31, 2000—$1,877,000) and for fixtures and fittings under capital lease was $348,000 (December 31, 2000—$247,000). Accumulated depreciation related to assets under capital lease at September 30, 2001 was $512,000 (December 31, 2000—$441,000).

4.  Long-term debt

    Long-term debt consists of the following (dollars in thousands):

	September 30, 2001		December 31, 2000
Loans from banks secured by property, plant and equipment payable over periods of 1 to 12 years, with a weighted average interest rate of 5.21 and 6.94 percent, respectively, primarily based on LIBOR	$	343,181	$	274,852
Loan secured by a river cruiseship payable over 5 years, with a weighted average interest rate of 8.50 percent based on LIBOR		—		1,062
Obligations under capital lease		790		859
		343,971		276,773
Less: current portion		40,336		53,722
	$	303,635	$	223,051

    Certain credit agreements of OEH have restrictive covenants. At September 30, 2001, OEH was in compliance with these covenants.

    The following is a summary of the aggregate maturities of long-term debt, including obligations under capital leases, at September 30, 2001 (dollars in thousands):

	Year ending December 31,
Remainder of 2002	$	25,706
2003		25,525
2004		90,271
2005		32,820
2006 and thereafter		129,313
	$	303,635

    The interest rates on substantially all of OEH's long-term debt are adjusted regularly to reflect current market rates. Accordingly, the carrying amounts of OEH's long-term debt also approximate fair value.

5.  Income taxes

    Income taxes provided by OEH relate principally to its foreign subsidiaries as pre-tax income is primarily foreign. The provision for income taxes consisted of the following (dollars in thousands):

	Nine months ended September 30, 2001
	Current		Deferred			Total
United States	$	1,501	$	460		$	1,961
Other foreign		2,382		(839	)		1,543
	$	3,883	$	(379	)	$	3,504

	Nine months ended September 30, 2000
	Current		Deferred		Total
United States	$	2,179	$	800	$	2,979
Other foreign		783		274		1,057
	$	2,962	$	1,074	$	4,036

    The Company is incorporated in Bermuda, which does not impose an income tax. OEH's effective tax rate is entirely due to the income taxes imposed by jurisdictions in which OEH conducts business other than Bermuda.

    Deferred income taxes reflect the net tax effects of temporary differences between the carrying amount of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. The following represents OEH's net deferred tax liabilities (dollars in thousands):

	September 30, 2001			December 31, 2000
Gross deferred tax assets	$	65,243		$	40,871
Less: Valuation allowance		(48,990	)		(25,063	)
Net deferred tax assets		16,253			15,808
Deferred tax liabilities		(20,904	)		(21,264	)
Net deferred tax liabilities	$	(4,651	)	$	(5,456	)

    The deferred tax assets consist primarily of operating loss carryforwards. The deferred tax liabilities consist primarily of differences between the tax basis of depreciable assets and the adjusted basis as reflected in the financial statements.

6.  Supplemental cash flow information

	Nine months ended September 30,
	2001		2000
	(Dollars in thousands)
Cash paid for:
Interest	$	15,330	$	17,221
Income taxes	$	5,425	$	4,187

    In conjunction with the acquisition of Bora Bora Lagoon Resort in 2001 and the Observatory and Lilianfels Hotels in 2000, liabilities were assumed as follows:

    Non-cash investing and financing activities (dollars in thousands):

Fair value of assets acquired	$	22,352		$	47,636
Cash paid		(19,600	)		(42,934	)
Liabilities assumed	$	2,752		$	4,702

7.  Commitments

    Outstanding contracts to purchase fixed assets were approximately $6,000,000 at September 30, 2001 (December 31, 2000—$32,000,000).

8.  Information concerning financial reporting for segments and operations in different geographical areas

    As reported in the Company's 2000 Form 10-K annual report, OEH has two business segments, (i) hotels and restaurants and (ii) tourist trains and cruises. Financial information regarding these business segments is as follows (dollars in thousands):

		Nine months ended September 30,
		2001			2000
Revenue:
	Hotels and restaurants	$	167,098		$	170,680
	Tourist trains and cruises		28,648			29,643
		$	195,746		$	200,323
Earnings from unconsolidated companies:
	Hotels and restaurants	$	4,473		$	4,218
	Tourist trains and cruises		2,342			1,636
		$	6,815		$	5,854
Depreciation and amortization:
	Hotels and restaurants	$	10,477		$	9,832
	Tourist trains and cruises		1,764			1,402
		$	12,241		$	11,234
Earnings from operations before net finance costs:
	Hotels and restaurants	$	48,169		$	52,518
	Tourist trains and cruises		4,141			4,908
			52,310			57,426
Central selling, general and administrative costs			(7,355	)		(7,169	)
			44,955			50,257
Net finance costs (1)			(14,643	)		(18,110	)
Earnings before income taxes			30,312			32,147
Provision for income taxes			3,504			4,036
Net earnings		$	26,808		$	28,111
Capital expenditure:
	Hotels and restaurants	$	24,381		$	24,620
	Tourist trains and cruises		1,500			4,810
		$	25,881		$	29,430

		September 30, 2001		December 31, 2000
Identifiable assets:
	Hotels and restaurants	$	731,667	$	644,517
	Tourist trains and cruises		89,429		81,359
		$	821,096	$	725,876

(1)

Net of capitalized interest and interest and related income.

    Financial information regarding geographic areas based on the location of properties is as follows (dollars in thousands):

		Nine months ended September 30,
		2001		2000
Revenue:
	Europe	$	92,736	$	92,143
	North America		59,651		66,545
	Rest of the world		43,359		41,635
		$	195,746	$	200,323

		September 30, 2001		December 31, 2000
Long-lived assets, at book value:
	Europe	$	239,160	$	224,869
	North America		195,963		185,201
	Rest of the world		233,591		205,691
		$	668,714	$	615,761

9.  Related party transactions

    For the nine months ended September 30, 2001, OEH paid subsidiaries of SCL $4,254,000 (2000—$4,089,000) for the provision of various services under a shared services agreement between OEH and SCL. These amounts have been included in selling, general and administrative expenses, and the unpaid net amount of $9,038,000 at September 30, 2001 is included in accounts payable.

    SCL has guaranteed an aggregate principal amount of $186,281,000 of bank loans to OEH outstanding at September 30, 2001 (December 31, 2000—$236,812,000), including a bank loan of $7,500,000 to Charleston Center LLC, owner of Charleston Place Hotel, and a $2,000,000 bank loan to Eastern & Oriental Express Ltd. in which OEH has minority shareholder interests.

Management's Discussion and Analysis of Financial Condition
and Results of Operations

RESULTS OF OPERATIONS

    OEH's operating results for the three months ended September 30, 2001 and September 30, 2000, expressed as a percentage of revenue, were as follows:

		Three months ended September 30
		2001	2000
		%	%
Revenue:
	Hotels and restaurants	83	83
	Tourist trains and cruises	17	17
		100	100
Expenses:
	Depreciation and amortization	6	5
	Operating	46	45
	Selling, general and administrative	28	24
Net finance costs		7	9
Earnings before income taxes		13	17
Provision of income taxes		2	2
Net earnings as a percentage of total revenue		11	15

    The revenues and earnings before interest, tax, depreciation and amortization ("EBITDA") of OEH's operations for the three months ended September 30, 2001 and September 30, 2000 are analyzed as follows (dollars in millions):

			Three months ended September 30
			2001			2000
Revenue:
	Owned Hotels:
		Europe	$	31.0		$	29.6
		North America		9.5			12.6
		Rest of the world		11.6			12.6
	Hotel management and part ownership interests			2.2			2.7
	Restaurants			2.0			3.3
	Tourist trains and cruises			11.7			12.5
Total			$	68.0		$	73.3
EBITDA:
	Owned Hotels:
		Europe	$	14.3		$	13.4
		North America		(0.5	)		1.7
		Rest of the world		2.6			3.3
	Hotel management and part ownership interests			2.2			2.7
	Restaurants			(0.3	)		0.2
	Tourist trains and cruises			2.2			3.6
	Central overheads			(2.8	)		(2.3	)
Total EBITDA			$	17.7		$	22.6

    OEH's operating results for the nine months ended September 30, 2001 and September 30, 2000, expressed as a percentage of revenue, were as follows:

		Nine months ended September 30
		2001	2000
		%	%
Revenue:
	Hotels and restaurants	85	85
	Tourist trains and cruises	15	15
		100	100
Expenses:
	Depreciation and amortization	6	5
	Operating	45	45
	Selling, general and administrative	26	25
Net finance costs		8	9
Earnings before income taxes		15	16
Provision of income taxes		2	2
Net earnings as a percentage of total revenue		13	14

    The revenues and EBITDA of OEH's operations for the nine months ended September 30, 2001 and September 30, 2000 are analyzed as follows (dollars in millions):

			Nine months ended September 30
			2001			2000
Revenue:
	Owned Hotels:
		Europe	$	67.8		$	65.6
		North America		45.1			48.7
		Rest of the world		38.8			38.7
	Hotel management and part ownership interests			8.1			8.3
	Restaurants			11.8			13.6
	Tourist trains and cruises			31.0			31.3
Total			$	202.6		$	206.2
EBITDA:
	Owned Hotels:
		Europe	$	25.9		$	24.6
		North America		11.6			14.6
		Rest of the world		11.0			11.9
	Hotel management and part ownership interests			8.1			8.3
	Restaurants			2.1			3.0
	Tourist trains and cruises			5.9			6.3
	Central overheads			(7.4	)		(7.2	)
Total EBITDA			$	57.2		$	61.5

Three Months Ended September 30, 2001 Compared To
Three Months Ended September 30, 2000

Revenue

    Total revenue, including earnings from unconsolidated companies, decreased by $5.3 million, or 7%, from $73.3 million in the three months ended September 30, 2000 to $68.0 million in the three months ended September 30, 2001. Hotels and restaurants revenue decreased by $4.5 million, or 7%, from $60.8 million in the three months ended September 30, 2000 to $56.3 million in the three months ended September 30, 2001, and tourist trains and cruises decreased by $0.8 million, or 6%, from $12.5 million for the three months ended September 30, 2000 to $11.7 million for the three months ended September 30, 2001.

    The revenue decrease for hotels and restaurants was due to a decrease at OEH's owned hotels of $2.7 million, or 5%, from $54.8 million in the three months ended September 30, 2000 to $52.1 million in the three months ended September 30, 2001. The revenue decrease at OEH's restaurants was $1.3 million, or 39%, from $3.3 million in the three months ended September 30, 2000 to $2.0 million in the three months ended September 30, 2001. This was mainly due to a drop in revenue at the '21' Club in New York City following the terrorist attacks in the United States on September 11, 2001. The revenue decrease at the hotels was mainly due to the adverse impact on travel and tourism following September 11, 2001. Significant levels of cancellations were experienced at the hotels in the immediate aftermath of September 11 resulting in significant REVPAR declines. Overall on a comparable basis, OEH's REVPAR at its owned hotels declined by 6% in U.S. dollars in the three months ended September 30, 2001.

    The OEH hotels that were most impacted during the quarter following September 11 were those with a high proportion of U.S. customers both in the U.S. and outside the U.S. from where approximately one-third of guests originate.

    The change in revenue at owned hotels is analyzed on a regional basis as follows:

    Europe.  Revenue increased by $1.4 million, or 5%, from $29.6 million for the three months ended September 30, 2000 to $31.0 million for the three months ended September 30, 2001. REVPAR on a comparable basis increased by 12% in local currencies in the three months ended September 30, 2001 compared to the three months ended September 30, 2000.

    North America.  Revenue decreased by $3.1 million, or 25%, from $12.6 million in the three months ended September 30, 2000 to $9.5 million in the three months ended September 30, 2001. REVPAR on a comparable basis for the North American region declined by 24% in the three months ended September 30, 2001 compared to the three months ended September 30, 2000.

    Rest of the World.  Revenue decreased by $1.0 million, or 8%, from $12.6 million in the three months ended September 30, 2000 to $11.6 million in the three months ended September 30, 2001. The REVPAR on a comparable basis for the rest of the world region decreased by 20% in local currencies in the three months ended September 30, 2001 compared to the three months ended September 30, 2000.

Depreciation and Amortization

    Depreciation and amortization increased by $0.4 million, or 11%, from $3.8 million in the three months ended September 30, 2000 to $4.2 million in the three months ended September 30, 2001.

Operating Expenses

    Operating expenses decreased by $1.9 million, or 6%, from $33.3 million in the three months ended September 30, 2000 to $31.4 million in the three months ended September 30, 2001. The decrease was primarily due to reduced occupancy at the hotels and lower revenue at the '21' Club restaurant in New York as referred to above.

Selling, General and Administrative Expenses

    Selling, general and administrative expenses increased by $1.3 million, or 7%, from $17.5 million in the three months ended September 30, 2000 to $18.8 million in the three months ended September 30, 2001.

Earnings from Operations

    Earnings from operations decreased by $5.2 million, or 28%, from $18.7 million in the three months ended September 30, 2000 to $13.5 million in the three months ended September 30, 2001. Earnings from operations represent total revenue less depreciation and amortization, operating expenses and selling, general and administrative expenses.

Net Finance Costs

    Net finance costs decreased by $1.6 million, or 25%, from $6.5 million in the three months ended September 30, 2000 to $4.9 million in the three months ended September 30, 2001, primarily due to repayment of debt out of the proceeds of the Company's initial public offering of shares in August 2000 and lower interest rates partly offset by increases in debt relating to capital expenditures and acquisitions financed in 2000 and 2001.

Taxes on Income

    The provision for income taxes decreased by $0.5 million, or 31%, from $1.6 million in the three months ended September 30, 2000 to $1.1 million in the three months ended September 30, 2001. The Company is incorporated in Bermuda, which does not impose an income tax. Accordingly, the entire income tax provision was attributable to income tax charges incurred by subsidiaries operating in jurisdictions that impose an income tax. The decrease of $0.5 million was mainly due to the reduced profitability of some of these subsidiaries.

Net Earnings

    Net earnings decreased by $3.1 million, or 29%, from $10.6 million in the three months ended September 30, 2000 to $7.5 million in the three months ended September 30, 2001. Net earnings represents earnings from operations less net finance costs and provision for income taxes.

Nine Months Ended September 30, 2001 Compared To
Nine Months Ended September 30, 2000

Revenue

    Total revenue, including equity earnings in unconsolidated companies, decreased by $3.6 million, or 2%, from $206.2 million in the nine months ended September 30, 2000 to $202.6 million in the nine months ended September 30, 2001. Hotels and restaurants revenue decreased by $3.3 million, or 2%, from $174.9 million in the nine months ended September 30, 2000 to $171.6 million for the nine months ended September 30, 2001. Tourist trains and cruises decreased by $0.3 million, or 1%, from $31.3 million for the nine months ended September 30, 2000 to $31.0 million for the nine months ended September 30, 2001.

    The revenue decrease for hotels and restaurants was due to a decrease at OEH's owned hotels of $1.3 million, or 1%, from $153.0 million in the nine months ended September 30, 2000 to $151.7 million in the nine months ended September 30, 2001. This includes a decline in revenue in the three months ended September 30, 2001 compared to the three months ended September 30, 2000 that is described above. Revenue at the '21' Club restaurant in New York declined by $1.8 million, or 13%, in the nine months ended September 30, 2001 compared to the nine months ended September 30, 2000. The decrease in the owned hotels revenue for the nine months ended September 30, 2001 is analyzed regionally as follows:

    Europe.  Revenue increased by $2.2 million, or 3%, from $65.6 million in the nine months ended September 30, 2000 to $67.8 million in the nine months ended September 30, 2001. The REVPAR on a comparable basis increased by 13% in local currencies in the nine months ended September 30, 2001 compared to the nine months ended September 30, 2000.

    North America.  Revenue decreased by $3.6 million, or 7%, from $48.7 million in the nine months ended September 30, 2000 to $45.1 million in the nine months ended September 30, 2001. The REVPAR on a comparable basis declined by 11% in U.S. dollars in the nine months ended September 30, 2001 compared to the nine months ended September 30, 2000.

    Rest of the World.  Revenue increased by $0.1 million, or 0.3%, from $38.7 million in the nine months ended September 30, 2000 compared to $38.8 million in the nine months ended September 30, 2001. The increase was mainly due to the Observatory and Lilianfels Hotels which were acquired in March 2000 and Bora Bora Lagoon Resort which was acquired in April 2001 partly offset by reduced revenues at the Copacabana Palace Hotel. The REVPAR on a comparable basis declined by 11% in local currencies in the nine months ended September 30, 2001 compared to the nine months ended September 30, 2000.

Depreciation and Amortization

    Depreciation and amortization increased by $1.0 million, or 9%, from $11.2 million in the nine months ended September 30, 2000 to $12.2 million in the nine months ended September 30, 2001.

Operating Expenses

    Operating expenses decreased by $0.8 million, or 1%, from $92.5 million in the nine months ended September 30, 2000 to $91.7 million in the nine months ended September 30, 2001.

Selling, General and Administrative Expenses

    Selling, general and administrative expenses increased by $1.5 million, or 3%, from $52.2 million in the nine months ended September 30, 2000 to $53.7 million in the nine months ended September 30, 2001.

Earnings from Operations

    Earnings from operations reduced by $5.3 million, or 10%, from $50.3 million in the nine months ended September 30, 2000 to $45.0 million in the nine months ended September 30, 2001. Earnings from operations represents total revenue less depreciation and amortization, operating expenses and selling, general and administrative expenses.

Net Finance Costs

    Net finance costs decreased by $3.5 million, or 19%, from $18.1 million in the nine months ended September 30, 2000 to $14.6 million in the nine months ended September 30, 2001, primarily due to repayment of debt out of the proceeds of the Company's initial public offering of shares in August 2000 and lower interest rates partly offset by increases in debt relating to capital expenditures and acquisitions financed in 2000 and 2001.

Taxes on Income

    The provision for income taxes decreased by $0.5 million, or 13%, from $4.0 million in the nine months ended September 30, 2000 to $3.5 million in the nine months ended September 30, 2001. The Company is incorporated in Bermuda, which does not impose an income tax. Accordingly, the entire income tax provision was attributable to income tax charges incurred by subsidiaries operating in jurisdictions that impose an income tax. The decrease of $0.5 million was mainly due to the reduced profitability of some of these subsidiaries.

Net Earnings

    Net earnings decreased by $1.3 million, or 5%, from $28.1 million in the nine months ended September 30, 2000 to $26.8 million in the nine months ended September 30, 2001. Net earnings represents earnings from operations less net finance costs and provision for income taxes.

LIQUIDITY AND CAPITAL RESOURCES

Working Capital

    OEH had cash and cash equivalents of $55.3 million at September 30, 2001, $39.4 million more than the $15.9 million at December 31, 2000. At September 30, 2001 and December 31, 2000, the undrawn amounts available to OEH under its short-term lines of credit were $35.1 million and $12.3 million, respectively. In addition OEH has available to draw under long-term facilities a further $20.0 million, bringing its total cash and availability to $110.4 million at September 30, 2001.

    Current assets less current liabilities, including the current portion of long-term debt, resulted in working capital of $7.2 million at September 30, 2001, an increase in the working capital of $43.4 million from a deficit of $36.2 million at December 31, 2000. The overall increase in working capital deficit was comprised of the following:

•

an increase in current assets of $42.3 million, of which $39.4 million was due to increased cash, $1.4 million was due to increased accounts receivable, and $1.5 million was due to increased inventories;



•

an increase in current liabilities of $12.3 million, of which $12.0 million was due to increased accounts payable and accrued liabilities; and



•

a reduction in the current portion of long-term debt of $13.4 million.

OEH's business does not require the maintenance of significant inventories or receivables and, therefore, working capital is not the most appropriate measure of liquidity.

Cash Flow

    Operating Activities.  Net cash provided by operating activities decreased by $3.2 million to $42.4 million for the nine months ended September 30, 2001, from cash provided by operating activities of $45.6 million for the nine months ended September 30, 2000. The decrease is primarily attributable to reduced earnings.

    Investing Activities.  Cash used in investing activities decreased by $9.4 million to $64.8 million for the nine months ended September 30, 2001, compared to $74.2 million for the nine months ended September 30, 2000. The principal components of this decrease were a $5.5 million decrease in expenditure on acquisitions and investments during the period from $44.8 million to $39.3 million and a $3.5 million reduction in capital expenditure.

    Financing Activities.  Cash provided from financing activities for the nine month period ended September 30, 2001 was $62.5 million as compared to cash provided by financing activities of $63.2 million for the nine month period ended September 30, 2000, a reduction of $0.7 million. In the nine month period ended September 30, 2001, OEH had proceeds from borrowings under long-term debt of $98.2 million as compared to proceeds of $82.9 million for the nine month period ended September 30, 2000. The proceeds of long-term debt were used to fund acquisitions, investments and capital expenditures during the period.

    Capital Commitments.  There were $6.0 million of capital commitments outstanding as of September 30, 2001.

Indebtedness

    At September 30, 2001, OEH had $344.0 million of long-term debt ($288.6 million net of cash), including the current portion, secured by assets which is repayable over periods of one to twelve years with a weighted average interest rate of 5.48%. See Note 4 to the Financial Statements regarding the maturity of long-term debt.

    Approximately 40% of the outstanding principal was drawn in European euros and the balance primarily in U.S. dollars. At September 30, 2001, OEH had the equivalent of $107 million of floating rate euro debt which had been swapped in to fixed rate euro debt that will convert back to floating rates in September 2002. At September 30, 2001, all other borrowings of OEH were in floating interest rates.

Liquidity

    OEH plans to increase its capital expenditures over the next few years by the expansion of existing hotel properties and the acquisition of additional properties consistent with its growth strategy. At September 30, 2001, OEH had capital commitments of $6 million overall relating to a number of projects.

    OEH expects to have available cash from operations and appropriate debt finance sufficient to fund its working capital requirements, capital expenditure, acquisitions and debt service for the foreseeable future.

QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

    OEH is exposed to market risk from changes in interest rates and foreign currency exchange rates. These exposures are monitored and managed as part of its overall risk management program, which recognizes the unpredictability of financial markets and seeks to mitigate material adverse effects on consolidated earnings. OEH does not hold market rate sensitive financial instruments for trading purposes.

    The market risk relating to interest rates arises mainly from the financing activities of OEH. Earnings are affected by changes in interest rates on borrowings, principally based on U.S. dollar LIBOR and EURIBOR, and on short-term cash investments. In September 2000, OEH entered into an interest rate swap, which exchanged floating rate euro debt for fixed rate euro debt in respect of the equivalent of euro 117 million ($107 million at September 30, 2001). If interest rates increased by ten percent, with all other variables held constant, annual net finance costs of OEH would have increased by approximately $1.9 million based on borrowings at September 30, 2001. The interest rates on substantially all of OEH's long-term debt are adjusted regularly to reflect current market rates. Accordingly, the carrying amounts approximate fair value. The fair value of the interest rate swap agreement at September 30, 2001 was a loss of $2.0 million.

    The market risk relating to foreign currencies and its effects have not changed materially during the third quarter of 2001 from those described in the Company's 2000 Form 10-K report.

RECENT ACCOUNTING PRONOUNCEMENTS

    For a discussion of OEH's adoption of recent accounting pronouncements, see Note 1(c) and (d) to the Financial Statements.

PART II

ITEM 1.  Legal Proceedings

    As previously reported, the Company has been named defendant in two lawsuits by purported holders of publicly-traded notes and debentures of Sea Containers Ltd. challenging the proposed spinoff distribution by Sea Containers of the Company's common shares owned by Sea Containers to its shareholders as not complying with the indenture terms of those notes and debentures. During the quarter ended September 30, 2001, there was no material development in this litigation. The Company understands that Sea Containers continues to believe the allegations of the plaintiffs in these lawsuits are without merit, and therefore Sea Containers will oppose vigorously any litigation relating to the proposed spinoff. Sea Containers is also indemnifying OEH with respect to possible losses arising from these lawsuits.

    Other than the foregoing litigation, the Company is involved in no material legal proceedings, other than ordinary routine litigation incidental to its business.

ITEM 5.  Other Information

    In August 2001, the Company registered with the Commission (Registration Statement No. 333-67268) a secondary offering by Sea Containers Ltd. of up to 5,000,000 existing class A common shares of the Company. Sea Containers has advised the Company that, during the three months ended September 30, 2001, 75,200 of the shares were sold at market prices prevailing at the times of sale, and that the sales were made in ordinary broker transactions at normal brokerage commissions through Salomon Smith Barney Inc. Sea Containers is bearing all costs and expenses of this offering, and the Company will receive none of the sale proceeds.

ITEM 6.  Exhibits and Reports on Form 8-K

    (a) Exhibits. The index to exhibits appears below, on the page immediately following the signature page to this report.

    (b) Reports on Form 8-K. No report on Form 8-K was filed by the Company during the quarter for which this report is filed.

SIGNATURES

    Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

	ORIENT-EXPRESS HOTELS LTD.
	By:	/s/ J.G. STRUTHERS James G. Struthers Vice President—Finance and Chief Financial Officer (Principal Accounting Officer)
Dated: November 13, 2001

EXHIBIT INDEX

    3.1 - Memorandum of Association and Certificate of Incorporation of the Company, filed as Exhibit 3.1 to Amendment No. 2 to the Company's Registration Statement on Form S-1 (Registration No. 333-12030) and incorporated herein by reference.

    3.2 - Bye-Laws of the Company, filed as Exhibit 3.2 to Amendment No. 4 to the Company's Registration Statement on Form S-1 (Registration No. 333-12030) and incorporated herein by reference.

QuickLinks

PART I
Orient-Express Hotels Ltd. and Subsidiaries Consolidated Balance Sheets
Orient-Express Hotels Ltd. and Subsidiaries Statements of Consolidated Operations
Orient-Express Hotels Ltd. and Subsidiaries Statements of Consolidated Cash Flows
Orient-Express Hotels Ltd. and Subsidiaries Statements of Consolidated Shareholders' Equity
Orient-Express Hotels Ltd. and Subsidiaries Notes to Consolidated Financial Statements
Management's Discussion and Analysis of Financial Condition and Results of Operations
PART II

ITEM 1. Legal Proceedings
ITEM 5. Other Information
ITEM 6. Exhibits and Reports on Form 8-K

SIGNATURES
EXHIBIT INDEX