Introduction

OEH has three business segments, namely (1) hotels and restaurants, (2) tourist trains and cruises and (3) real estate and property development. Hotels currently consist of 40 deluxe hotels. Thirty-six of these hotels are wholly or majority owned (except Charleston Place Hotel), and are referred to in this discussion as "owned hotels." As explained in Note 3 to the financial statements, OEH holds a 19.9% equity investment in Charleston Center LLC, owner of Charleston Place Hotel, which OEH manages and has consolidated into its financial statements effective December 31, 2008. The other four hotels, in which OEH has unconsolidated equity interests and operate under management contracts, are referred to in this discussion as "hotel management interests." Of the owned hotels, 11 are located in Europe, eight in North America and 17 in the rest of the world.

On June 2, 2009, OEH sold the Lapa Palace Hotel in Lisbon, Portugal at a price of $42.0 million, of which $15.7 million is deferred until 2010, which resulted in a gain of $5.0 million (or $0.08 per share). Theoperation of this hotel was not material to OEH's consolidated financial statements and, accordingly, pro forma data have not been presented. In June 2009, OEH decided to sell Windsor Court Hotel in New Orleans. In December 2007, OEH decided to sell its investment in Bora Bora Lagoon Resort. The results of these three hotels have been presented as discontinued operations for all of the interim periods presented.

OEH currently owns and operates the restaurants '21' Club in New York and La Cabana in Buenos Aires.

OEH's tourist trains and cruises segment operates six tourist trains - four of which are owned and operated by OEH, one in which OEH has an equity interest and exclusive management contracts, and one in which OEH has an equity investment - and a river cruiseship and five canalboats.

For a discussion of OEH's liquidity, see under the heading "Liquidity and Capital Resources" below. On May 4, 2009, the Company completed a public offering through underwriters in the United States of 25,875,000 newly issued class A common shares including 3,375,000 shares covered by the underwriters' over-allotment option in the offering which was exercised in full. OEH intends to use the net proceeds, approximately $140.9 million, primarily for debt reduction and general corporate purposes.

For a discussion of the impact of foreign exchange rate movements on OEH's results of operations and financial condition and the change of application of accounting policy for Porto Cupecoy, see Item 7 - Management's Discussion and Analysis in the Company's 2008 Form 10-K annual report.

Results of Operations

Three months Ended June 30, 2009 compared to

Three months Ended June 30, 2008

OEH's operating results for the three months ended June 30, 2009 and 2008, expressed as a percentage of revenue, were as follows:

                                                      2009   2008
Three months ended June 30,                            %      %

Revenue
Hotels and restaurants                                  85     81
Tourist trains and cruises                              15     16
Real estate                                              -      3
                                                       100    100
Expenses
Depreciation and amortization                            8      5
Operating                                               49     47
Selling, general and administrative                     33     28
Net finance costs                                        6      5
Earnings before income taxes                             4     15
Provision for income taxes                              (8 )   (6 )
Earnings from unconsolidated companies                   2      3
Net (losses)/earnings from continuing operations        (2 )   12
Net losses from discontinued operations, net of tax    (17 )   (1 )
Net (losses)/earnings as a percentage of revenue       (19 )   11

Segment net earnings before interest, foreign currency, tax (including tax on unconsolidated companies), depreciation and amortization ("segment EBITDA") of OEH's operations for the three months ended June 30, 2009 and 2008 are analyzed as follows (dollars in millions):

Three months ended June 30,    2009     2008

Segment EBITDA:
Owned hotels:
Europe                        $ 17.2   $ 32.8
North America                    4.3      2.5
Rest of the World                3.7      3.6
Hotel management interests       1.2      7.8
Restaurants                      0.1      0.9
Tourist trains and cruises       6.9      9.8
Real estate                     (0.5 )   (0.4 )
Central overheads               (6.8 )   (7.2 )
Total segment EBITDA          $ 26.1   $ 49.8

The foregoing segment EBITDA reconciles to net (losses)/earnings as follows (dollars in millions):

Three months ended June 30,                                        2009      2008

Net (losses)/earnings                                             $ (24.3 ) $ 19.5
Add:
Depreciation and amortization                                         9.7      9.4
Net finance costs                                                     8.0      8.0
Provision for income taxes                                           10.3      9.7
Loss from discontinued operations, net of tax                        21.6      1.8
Share of provision for income taxes of unconsolidated companies       0.8      1.4
Segment EBITDA                                                    $  26.1   $ 49.8

Management evaluates the operating performance of OEH's segments on the basis of segment EBITDA and believes that segment EBITDA is a useful measure of operating performance because segment EBITDA is not affected by non-operating factors such as leverage and the historic cost of assets. EBITDA is a financial measure commonly used in OEH's industry. OEH's segment EBITDA, however, may not be comparable in all instances to EBITDA as disclosed by other companies. Segment EBITDA should not be considered as an alternative to earnings from operations or net earnings (as determined in accordance with U.S. generally accepted accounting principles) as a measure of OEH's operating performance, or as an alternative to net cash provided by operating, investing and financing activities (as determined in accordance with U.S. generally accepted accounting principles) as a measure of OEH's ability to meet cash needs.

Operating information for OEH's owned hotels for the three months ended June 30, 2009 and 2008 is as follows:

                                     Three months
                                    ended June 30,
                                   2009       2008

Average Daily Rate (in dollars)
Europe                                753        978
North America                         331        374
Rest of the world                     266        264
Worldwide                             429        520

Rooms Available (in thousands)
Europe                                 79         81
North America                          69         68
Rest of the world                     119        110
Worldwide                             267        259

Rooms Sold (in thousands)
Europe                                 39         50
North America                          40         49
Rest of the world                      53         61
Worldwide                             132        160

Occupancy (percentage)
Europe                                 49         62
North America                          58         72
Rest of the world                      45         55
Worldwide                              49         62

RevPAR (in dollars)
Europe                                368        600
North America                         190        267
Rest of the world                     119        148
Worldwide                             211        321

                                                            Change %
                                                                  Local
                                                       Dollars   Currency
Same Store RevPAR (in dollars)
Europe                                368        600       -39 %      -26 %
North America                         241        345       -30 %      -29 %
Rest of the world                     134        158       -15 %      -11 %
Worldwide                             239        359       -33 %      -24 %

Average daily rate is the average amount achieved for the rooms sold. RevPAR is revenue per available room, that is the rooms revenue divided by the number of available rooms for each night of operation. Occupancy is the number of rooms sold divided by

the number of available rooms. Same store RevPAR is a comparison based on the operations of the same units in each period, such as by excluding the effect of any acquisitions or major refurbishments. The same store data excludes the following operations:

Hotel das Cataratas       Charleston Place Hotel
Lapa Palace               Windsor Court
Bora Bora Lagoon Resort   The Governor's Residence
La Residence D'Angkor

Overview

The net loss for the three months ended June 30, 2009 was $24.3 million ($0.36 per common share) on revenue of $129.2 million, compared with net earnings of $19.5 million ($0.46 per common share) on revenue of $170.2 million in the second quarter of the prior year. OEH's revenue in the current quarter was adversely affected by the global economic downturn. Costs continue to be under tight control.

Excluding discontinued operations, the net loss for the three months ended June 30, 2009 was $2.6 million compared with net earnings of $21.3 million in the three months ended June 30, 2008.

Revenue



Three months ended June 30,                     2009           2008
                                              (dollars in thousands)
Revenue:
Hotels and restaurants
Owned hotels
Europe                                      $      52,226    $  81,239
North America                                      26,825       16,989
Rest of the world                                  26,276       30,840
Hotel management/part ownership interests           1,249        3,324
Restaurants                                         3,561        5,288
                                                  110,137      137,680
Tourist trains and cruises                         19,081       28,067
Real estate                                             -        4,443
                                            $     129,218    $ 170,190

Total revenue decreased by $41.0 million, or 24%, from $170.2 million in the three months ended June 30, 2008 to $129.2 million in the three months ended June 30, 2009. Revenue in the three months ended June 30, 2009 included $13.4 million at Charleston Place Hotel, which is consolidated for the first time in the current year. Excluding the Charleston Place revenue,

hotels and restaurants revenue decreased by $41.0 million, or 30% from $137.7 million in the three months ended June 30, 2008 to $96.7 million in the three months ended June 30, 2009. Tourist trains and cruises revenue decreased by $9.0 million, or 32%, from $28.1 million for the three months ended June 30, 2008 to $19.1 million for the three months ended June 30, 2009.

The decrease in hotel revenue was due primarily to the combination of lower occupancy, particularly in Europe, and lower average rates across the group.

The revenue from restaurants decreased by $1.7 million, or 33%, from $5.3 million in the three months ended June 30, 2008 to $3.6 million for the three months ended June 30, 2009.

For owned hotels overall, same store RevPAR in U.S. dollars decreased by 33% in the three months ended June 30, 2009 compared to the three months ended June 30, 2008. Measured in local currencies this decrease was 24%.

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

Europe

Revenue decreased by $29.0 million, or 36%, from $81.2 million for the three months ended June 30, 2008 to $52.2 million for the three months ended June 30, 2009. Difficult trading conditions across Europe caused average daily rates to fall by 23% from $978 in the three months ended June 30, 2008 to $753 in the three months ended June 30, 2009, and occupancy to fall from 62% in the three months ended June 30, 2008 to 49% in the three months ended June 30, 2009. On a same store basis, RevPAR in local currency decreased by 26%, and in U.S. dollars this translated into a decrease of 39%.

Exchange rate movements caused revenue to fall by $10.6 million in the three months ended June 30, 2009 compared with the same period in 2008.

North America

Revenue increased by $9.8 million, or 58%, from $17.0 million in the three months ended June 30, 2008 to $26.8 million in the three months ended June 30, 2009. The 2009 revenue included $13.4 million at Charleston Place Hotel, which OEH consolidated from January 1, 2009 for the first time. Excluding Charleston Place, revenue in the North America region fell by $3.6 million, or 21%, in the three months ended June 30, 2009 to $13.4 million.

Following the outbreak of H1N1 (swine flu) in Mexico, occupancy at Maroma Resort & Spa declined from 68% in the three months ended June 30, 2008 to 35% in the same period in 2009. Revenue at this hotel fell by $2.5 million, or 54%, from $4.5 million in the three months ended June 30, 2008 to $2.1 million in the three months ended June 30, 2009.

On a same store basis, excluding Charleston Place Hotel, RevPAR decreased by 29%. Average occupancy across the North American properties was 58% compared to 72% in the same period in 2008. Average daily rates fell by 11% from $374 in the three months ended June 30, 2008 to $331 in the three months ended June 30, 2009.

Rest of the World

Revenue decreased by $4.5 million, or 15%, from $30.8 million in the three months ended June 30, 2008 to $26.3 million in the three months ended June 30, 2009. Exchange rate movements across the region were responsible for $4.4 million of the revenue fall and a decline in average room rates and occupancy caused overall revenue to drop by $0.1 million.

Revenue at OEH's hotels in South America collectively decreased by $1.5 million, or 12%, from $12.6 million in the three months ended June 30, 2008 to $11.1 million in the three months ended June 30, 2009. Had exchange rates in the first three months of 2009 been the same as in the first three months of 2008, South American revenue would have been $0.8 million higher than in the three months ended June 30, 2008.

Southern Africa revenue decreased by $1.6 million, or 20%, from $8.2 million in the three months ended June 30, 2008 to $6.6 million in the three months ended June 30, 2009. Of this revenue fall, $0.6 million was due to exchange rate movements on the translation of the South African rand and Botswana pula to U.S. dollar. Revenue at OEH's two Australian properties decreased by $1.3 million, or 22%, to $4.8 million in the three months ended June 30, 2009; 92% of the change in revenue, or $1.2 million, was due to the devaluation of the Australian dollar against the U.S. dollar.

The RevPAR on a same store basis for the Rest of the World region decreased by 11% in local currencies in the three months ended June 30, 2009 compared to the three months ended June 30, 2008. This translates to a 15% decrease when expressed in U.S. dollars.

Hotel Management and Part-Ownership Interests: Revenue decreased by $2.1 million from $3.3 million in the three months ended June 30, 2008 to $1.2 million in the three months ended

June 30, 2009. The 2008 revenue included $1.7 million in respect of Charleston Place Hotel, which is included within OEH's consolidated earnings with effect from January 1, 2009. Excluding this hotel from the prior year, revenue from hotel management and part ownership interests decreased by $0.4 million from $1.6 million in the three months ended June 30, 2008 to $1.2 million in the three months ended June 30, 2009.

Restaurants: Revenue decreased by $1.7 million, or 33%, from $5.3 million in the three months ended June 30, 2008 to $3.6 million in the three months ended June 30, 2009.

Trains and Cruises: Revenue decreased by $9.0 million, or 32%, from $28.1 million in the three months ended June 30, 2008 to $19.1 million in the three months ended June 30, 2009. Venice Simplon-Orient-Express revenue decreased by $5.3 million from $12.4 million in the three months ended June 30, 2008 to $7.1 million in the three months ended June 30, 2009. Fewer day train services were operated in the United Kingdom in the three months ended June 30, 2009 than in the prior year, resulting in a revenue decrease of $0.9 million compared with the same period in the prior year.

Real Estate: Although four condominiums at Porto Cupecoy were sold during the three months ended June 30, 2009, no revenue was recognized following OEH's decision to change the application of its accounting policy in respect of the Porto Cupecoy development in the fourth quarter of 2008. Revenue of $4.4 million was recognized in the three months ended June 30, 2008 at Porto Cupecoy under the percentage completion method of accounting. There was no revenue at Keswick Hall in the three months ended June 30, 2009 or in the three months ended June 30, 2008.

Depreciation and amortization

Depreciation and amortization increased by $0.3 million from $9.4 million in the three months ended June 30, 2008 to $9.7 million in the three months ended June 30, 2009. The 2009 depreciation charge includes an expense of $1.0 million in respect of Charleston Place. Excluding this charge, depreciation was $0.7 million lower in 2009 than in the prior period, $0.2 million of which was due to the change in exchange rates for the three months ended June 30, 2009 compared with exchange rates in the same period in 2008.

Operating expenses

Operating expenses decreased by $16.6 million from $80.4 million in the three months ended June 30, 2008 to $63.8 million in the three months ended June 30, 2009. Operating expenses in 2009

include a charge of $5.6 million in respect of Charleston Place. Excluding this expenditure, operating expenses were $22.2 million lower in 2009 than in the prior period, $1.6 million of which was due to the change in exchange rates for the three months ended June 30, 2009 compared with exchange rates in the same period in 2008. Operating expenses were 47% of revenue in the three months ended June 30, 2008 and 49% of revenue in the three months ended June 30, 2009. Excluding Charleston Place Hotel's revenue and expenses, operating expenses in 2009 increased by 1% to 50% of revenue.

Selling, general and administrative expenses

Selling, general and administrative expenses decreased by $5.1 million from $47.2 million in the three months ended June 30, 2008 to $42.1 million in the three months ended June 30, 2009. The 2009 costs include a charge of $3.5 million in respect of Charleston Place Hotel. Excluding these costs, selling, general and administrative expenses were $8.6 million lower in 2009 than in the prior period, $2.3 million of which was due to the change in exchange rates for the three months ended June 30, 2009 compared with exchange rates in the same period in 2008. Selling, general and administrative expenses were 28% of revenue in the three months ended June 30, 2008 and 33% of revenue in the three months ended June 30, 2009. Excluding Charleston Place Hotel's revenue and expenses, selling, general and administrative expenses in 2009 were 33% of revenue in 2009.

Segment EBITDA



Three months ended June 30                      2009            2008
                                               (dollars in thousands)

Segment EBITDA:
Hotels and restaurants
Owned hotels
Europe                                      $     17,177    $     32,846
North America                                      4,299           2,513
Rest of the world                                  3,692           3,633
Hotel management/part ownership interests          1,223           7,736
Restaurants                                          153             920
                                                  26,544          47,648
Tourist trains and cruises                         6,854           9,826
Real estate                                         (474 )          (463 )
Central overheads                                 (6,833 )        (7,159 )
                                            $     26,091    $     49,852

Segment EBITDA for the three months ended June 30, 2009 decreased by 48% from $49.9 million in 2008 to $26.1 million in 2009. Segment EBITDA margins (calculated as segment EBITDA as a percentage of revenue) decreased by 9% from 29% for the three months ended June 30, 2008, to 20% for the three months ended June 30, 2009.

The European hotels collectively reported a segment EBITDA of $17.2 million in 2009 compared to $32.8 million in the same period in 2008. As a percentage of European hotels revenue, the European segment EBITDA margin fell from 40% in 2008 to 33% in 2009.

With the inclusion of Charleston Place Hotel from January 1, 2009, segment EBITDA in the North American hotel region increased by 71% from $2.5 million in the three months ended June 30, 2008, to $4.3 million in the three months ended June 30, 2009. Excluding Charleston Place Hotel, segment EBITDA in the North American region decreased by $2.3 million, or 93%, from $2.5 million in the three months ended June 30, 2008, to $0.2 million in the three months ended June 30, 2009.

Segment EBITDA in the Rest of the World hotel region increased by 2% from $3.6 million in the three months ended June 30, 2008 to $3.7 million in the three months ended June 30, 2009. The segment EBITDA margin for the three months ended June 30, 2009 was 14%, compared to a margin of 12% for the same period in 2008.

Earnings from operations before net finance costs

Earnings from operations decreased by $19.6 million from a profit of $33.2 million in the three months ended June 30, 2008 to a profit of $13.6 million in the three months ended June 30, 2009, due to the factors described above.

Net finance costs

Net finance costs were $8.0 million for the three months ended June 30, 2008 and for the three months ended June 30, 2009. The three months ended June 30, 2008 included a foreign exchange gain of $2.6 million compared to a foreign exchange loss of $0.4 million in the three months ended June 30, 2009. Excluding these foreign exchange items, net interest expense decreased by $3.0 million, or 29%, from $10.6 million in the three months ended June 30, 2008 to $7.6 million in the three months ended June 30, 2009, primarily due to lower interest rates in the three months ended June 30, 2009 compared to the same period in the prior year.

Provision for income taxes

The provision for income taxes increased by $0.6 million, from a provision of $9.7 million in the three months ended June 30, 2008 to a provision of $10.3 million in the three months ended June 30, 2009.

The provision for income taxes for the three months ended June 30, 2009 includes a current tax charge of $2.2 million and a deferred tax charge of $3.2 million arising in Italy in connection with the closure of a tax audit in respect of the 2004, 2005 and 2006 tax years. OEH had previously included a liability of $4.9 million within its FIN 48 provision in respect of these uncertain tax positions. The provision for income taxes in the three months ended June 30, 2009 includes a tax credit in the amount of $4.9 million to release this FIN 48 provision. The net cost to OEH taking into account all of these entries is $0.5 million. The $2.2 million current tax liability is payable in 12 quarterly instalments of approximately $0.2 million each, commencing in July 2009.

The provision for income taxes for the three months ended June 30, 2009 included a deferred tax charge of $2.7 million arising in respect of Brazilian fixed asset timing differences, following movements in the exchange rate between the dollar and Brazilian real.

Excluding the FIN 48 tax credit related to the Italian uncertain tax position, the provision for income taxes for the three months ended June 30, 2009 included a tax provision of $0.4 million in respect of the FIN 48 liability, compared to a provision of $0.5 million in respect of the FIN 48 liability in the three months ended June 30, 2008.

Earnings from unconsolidated companies

Earnings from unconsolidated companies net of tax decreased by $3.8 million, from $5.8 million in the three months ended June 30, 2008 to $2.0 million in the three months ended June 30, 2009. The 2008 earnings included $2.4 million in respect of Charleston Place Hotel, which is included within OEH's consolidated earnings with effect from January 1, 2009. Excluding this hotel from the prior year, earnings from unconsolidated companies net of tax decreased by $1.4 million from $3.4 million in the three months ended June 30, 2008 to $2.0 million in the three months ended June 30, 2009. The tax cost associated with earnings from unconsolidated companies, excluding Charleston Place Hotel, was $0.9 million in 2008 and $0.7 million in 2009.

Loss from discontinued operations

The loss from discontinued operations consisted of the losses arising from Bora Bora Lagoon Resort and the Windsor Court Hotel which are being held for sale, and the earnings of the Lapa Palace Hotel, which was sold during the three months ended June 30, 2009, including the gain arising on the sale.

Bora Bora Lagoon Resort's net loss increased from $2.3 million for the three months ended June 30, 2008 to $12.5 million for the three months ended June 30, 2009. The 2009 loss includes an impairment charge of $12.0 million in respect of this property.

The Windsor Court net loss increased from $0.5 million for the three months ended June 30, 2008 to $14.5 million for the three months ended June 30, 2009. The 2009 loss includes an impairment charge of $21.5 million in anticipation of the sale of this property, with a related tax credit of $7.1 million in respect of the impairment write down.

The Lapa Palace Hotel net earnings increased from $0.9 million for the three months ended June 30, 2008 to $5.3 million for the three months ended June 30, 2009. The 2009 earnings included a gain of $5.0 million arising on the disposal of the hotel including a foreign currency translation adjustment gain of $6.7 million. . . .