10-K 1 bel-20151231x10k.htm 10-K 10-K
 
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549 
 
 
 
 
 

 FORM 10-K
(Mark One)
 
 
 
 
x
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 For the fiscal year ended December 31, 2015
OR
o
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 001-16017
 
 
 
 
 
BELMOND LTD.
(Exact name of registrant as specified in its charter) 
Bermuda
 
98-0223493
(State or other jurisdiction of incorporation or organization)
 
(I.R.S. Employer Identification No.)
 
22 Victoria Street,
Hamilton HM 12, Bermuda
(Address of principal executive offices)
Registrant’s telephone number, including area code:  (441) 295-2244
 
 
 
 
 
SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT:
Title of each class
 
Name of each exchange on which registered
Class A Common Shares, $0.01 par value each
 
New York Stock Exchange
Preferred Share Purchase Rights
 
New York Stock Exchange
 SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT: None.
 
 
 
 
 
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.  Yes x  No o
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act.  Yes o  No x
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Act 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. Yes x  No o
 Indicate by check mark whether the registrant has submitted electronically and posted on its corporate website, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).  Yes x  No o
 Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. (Not applicable. See third paragraph under Item 1—Business.)
 Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company.  See definitions of “large accelerated filer”, “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Act. (Check one):
Large Accelerated Filer x
 
Accelerated Filer o
Non-Accelerated Filer o
 
Smaller reporting company o
(Do not check if a smaller reporting company)
 
 
 Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes o  No x
 The aggregate market value of the class A common shares held by non-affiliates of the registrant computed by reference to the closing price on June 30, 2015 (the last business day of the registrant’s second fiscal quarter in 2015) was approximately $1,087,000,000.
 As of February 19, 2016, 101,225,294 class A common shares and 18,044,478 class B common shares of the registrant were outstanding.  All of the class B shares are owned by a subsidiary of the registrant (see Note 17(c) to the Financial Statements (Item 8)).
 
 
 
 
 
DOCUMENTS INCORPORATED BY REFERENCE: None
 



Table of Contents
 
 
 
 
Page
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 


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FORWARD-LOOKING STATEMENTS
 
This Annual Report on Form 10-K contains statements that constitute "Forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking statements are any statements other than of historical fact, including statements regarding the intent, belief or current expectations of Belmond Ltd. and/or any of its directors or officers with respect to the matters discussed in this Annual Report. In some cases, forward-looking statements can be identified by the use of words such as “may,” “potential,” “anticipate,” “target,” “expect,” “estimate,” “intend,” “should,” “plan,” “goal,” “believe,” or other words of similar meaning. Such forward-looking statements appear in several places in this Annual Report, including but not limited to Item 1—Business, Item 7—Management's Discussion and Analysis of Financial Condition and Results of Operations, and Item 7A—Quantitative and Qualitative Disclosures about Market Risk.
 
All forward-looking statements involve risks and uncertainties that could cause actual results to differ materially from those discussed in, or implied by, the forward-looking statements.

Actual results could differ materially from those anticipated in the forward-looking statements due to a number of factors, including but not limited to those described in Item 1A—Risk Factors.
 
Investors are cautioned not to place undue reliance on any forward-looking statements made in this Annual Report which are based on currently available operational, financial, and competitive information and as such, are not guarantees of future performance.  Instead, these forward-looking statements reflect management's opinion, expectation or belief only as of the date on which they are made. Except as otherwise required by law, Belmond Ltd. undertakes no obligation to update or revise publicly any forward-looking statement, whether as a result of new information, future events or otherwise.


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PART I

ITEM 1.        Business
 
Belmond Ltd. is incorporated in the Islands of Bermuda and is a “foreign private issuer” as defined in Rule 3b-4 promulgated by the U.S. Securities and Exchange Commission (“SEC”) under the U.S. Securities Exchange Act of 1934 (the “1934 Act”) and in Rule 405 under the U.S. Securities Act of 1933. As a result, it is eligible to file its annual reports pursuant to Section 13 of the 1934 Act on Form 20-F (in lieu of Form 10-K) and to file its interim reports on Form 6-K (in lieu of Forms 10-Q and 8-K). However, the Company has elected to file its annual and interim reports on Forms 10-K, 10-Q and 8-K, including any instructions therein that relate specifically to foreign private issuers. The class A common shares of the Company are listed on the New York Stock Exchange (“NYSE”).
 
The terms "Belmond" and the "Company" are used in this report to refer to Belmond Ltd. and Belmond Ltd. and its subsidiaries, unless otherwise stated.

These reports and amendments to them are available free of charge on the Internet website of the Company as soon as reasonably practicable after they are filed electronically with the SEC. The principal Internet website address is belmond.com. Unless specifically noted, information on the Belmond website is not incorporated by reference into this Form 10-K annual report.
 
Pursuant to Rule 3a12-3 under the 1934 Act regarding foreign private issuers, the proxy solicitations of the Company are not subject to the disclosure and procedural requirements of Regulation 14A under the 1934 Act, and transactions in the Company’s equity securities by its officers, directors and significant shareholders are exempt from the reporting and liability provisions of Section 16 of the 1934 Act.
 
Introduction
 
Belmond is a leading luxury hotel company and sophisticated adventure travel operator with exposure to both mature and emerging national economies. The Company’s predecessor began acquiring hotels in 1976 and organized the Company in 1994. Belmond currently owns, partially-owns and/or operates 44 properties (with two additional businesses scheduled for future openings, the Belmond Cadogan Hotel in London, England and the Belmond Grand Hibernian train to be based in Dublin, Ireland), consisting of 34 highly individual deluxe hotels, one stand-alone restaurant, six tourist trains and three river/canal cruise businesses. This portfolio includes one long-term leased hotel in Bali, Indonesia where the owner dispossessed Belmond from operation of the hotel in November 2013 (see Item 3—Legal Proceedings). The locations of Belmond's 44 properties operating in 22 countries are shown in the map on the preceding page. Belmond acquires, leases or manages only distinctive properties in areas of outstanding cultural, historic or recreational interest in order to provide luxury lifestyle experiences for the discerning traveler.

Revenue, earnings and identifiable assets of Belmond in 2015, 2014 and 2013 for Belmond's business segments and geographic areas are presented in Note 23 to the Financial Statements (Item 8). Belmond's operating segments are aggregated into six reportable segments, namely owned hotels in each of Europe, North America and Rest of World, part-owned/managed hotels, owned trains and cruises, and part-owned/managed trains.
  
Hotels represent the largest part of Belmond’s business, contributing 87% of revenue in 2015, 86% of revenue in 2014 and 87% in 2013. Trains and cruises accounted for 13% of revenue in 2015, 14% of revenue in 2014 and 13% in 2013. Approximately 92% of Belmond’s customer revenue in 2015 was from leisure travelers, with approximately 47% originating from North America, 37% from Europe and the remaining 14% from elsewhere in the world.
 
Belmond’s worldwide portfolio of hotels currently consists of 3,010 individual guest rooms and multiple-room suites, each known as a “key”. Hotels owned by Belmond in 2015 achieved an average daily room rate (“ADR”) of $481 (2014 - $523; 2013 - $510) and a revenue per available room (“RevPAR”) of $295 (2014 - $306; 2013 - $306).

In recent years, Belmond has sold to third parties a number of properties not considered key to Belmond’s portfolio of unique, high-valued properties. In March 2014, Belmond sold Inn at Perry Cabin by Belmond on the eastern shore of Maryland, with Belmond continuing to manage the hotel under a ten-year management agreement with the new owner. See Note 4 to the Financial Statements. In May 2015, Belmond, together with its joint venture partner, each sold their 50% ownership in the entity which owned the Hotel Ritz by Belmond in Madrid, Spain and Belmond ended its agreement to manage the hotel. See Note 6 to the Financial Statements.

On February 23, 2014, the Company (formerly known as Orient-Express Hotels Ltd.) announced that its board of directors had approved a proposal to operate the Company's portfolio of luxury hotels and travel experiences under a new brand name

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—"Belmond"—from March 10, 2014, and to change its principal Internet website address to belmond.com. Belmond has retained its long-term license agreement with SNCF, the French transportation company that owns the "Orient-Express" trademark, for the Venice Simplon-Orient-Express train. With the decision to introduce the "Belmond" brand, Belmond also entered into an agreement with SNCF to terminate (with effect from December 31, 2014) the "Orient-Express" license for hotel use, without any cost or penalty. At the 2014 Annual General Meeting of Shareholders, shareholders approved a change in Belmond's corporate name from Orient-Express Hotels Ltd. to Belmond Ltd. in order to align Belmond's corporate identity with that of its primary luxury brand. On July 28, 2014, Belmond changed the ticker symbol of its class A common shares listed on the New York Stock Exchange from OEH to BEL.

On March 21, 2014, Belmond entered into a $657,000,000 senior secured credit facility, consisting of a $552,000,000 seven-year term loan and a $105,000,000 five-year, dual-currency revolving credit facility. The term loan comprised a $345,000,000 U.S. dollar-denominated tranche and a €150,000,000 euro-denominated tranche ($207,000,000 as of the completion date). Belmond used the proceeds from the term loan to refinance substantially all of the funded debt of Belmond (other than the debt of Belmond Charleston Place, a consolidated variable interest entity with separate non-recourse financing). On June 2, 2015, Belmond entered into an amendment to its senior secured credit facility to reduce the interest rate on the euro-denominated tranche to EURIBOR plus a 3.00% margin from EURIBOR plus a 3.25% margin.

On July 8, 2014, Belmond announced the execution of a management agreement with Cadogan Hotel Partners Limited to operate Belmond Cadogan Hotel, a 64-key hotel in the Knightsbridge area of London, England. The 127-year old hotel closed at the end of July 2014 to undergo a $48,000,000 investment project. The fully renovated and re-conceptualized Belmond Cadogan Hotel is expected to open in early 2017 with refurbished public areas and the reconfiguration reduced to 54 keys in order to accommodate demand from luxury travelers for larger junior suites and suites. In October 2014, Belmond signed an additional agreement with Cadogan Hotel Partners Limited to operate Durley House, an all-suite, private-residence-style property located on the same block of Sloane Street as Belmond Cadogan Hotel. Durley House is currently closed for renovation and is expected to reopen in late 2017. Upon reopening, the 15 renovated long-stay suites at Durley House will be serviced by Belmond Cadogan Hotel and guests will have full use of the hotel's facilities.

In November 2014, Belmond announced Belmond Grand Hibernian, the first overnight luxury rail experience of its kind in Ireland, which will tour the countryside of Ireland upon its expected commencement of operations in the summer of 2016. The luxury sleeper train will accommodate up to 40 guests in 20 en-suite cabins. Belmond Grand Hibernian will build on the Company's expertise in operating a stable of the world's most famous trains, including Belmond Royal Scotsman, currently the U.K.'s only luxury touring sleeper train, and the legendary Venice Simplon-Orient-Express.

Owned HotelsEurope
 
Italy
 
Belmond Hotel Cipriani—95 keys—in Venice was built for the most part in the 1950s and is located on about five acres (part on long-term lease) on Giudecca Island across from the Piazza San Marco which is accessible by a free private boat service. Most of the rooms have views overlooking the Venetian lagoon. Features include fine cuisine in three indoor and outdoor restaurants -- one of which recently gained a Michelin star, the Oro Restaurant -- gardens and terraces encompassing an Olympic-sized swimming pool, a tennis court, a spa and fitness center, and a large banquet and meeting facility situated in an historic refurbished warehouse. During the 2015-16 winter closure, 15 rooms in the Palazzo Vendramin and Palazzetto are being refurbished.
 
Belmond Hotel Splendido and Belmond Splendido Mare—83 keys—overlook picturesque Portofino harbor on the Italian Riviera. Set on four acres, the main hotel was built in 1901 and is surrounded by gardens and terraces which include a swimming pool, spa and tennis court. There are two restaurants each with open-air dining as well as banquet/meeting rooms, and a shuttle service linking the main hotel with the smaller Belmond Splendido Mare on the harbor below. During 2015,10 suites and guest rooms were refurbished.
 
Belmond Villa San Michele—45 keys—is located in Fiesole, a short distance from Florence. Originally built as a monastery in the 15th century with a façade attributed to Michelangelo, it has stunning views over historic Florence and the Arno River Valley.  Belmond has remodeled and expanded the guest accommodation to luxury standards in recent years including the addition of a swimming pool. A shuttle service is provided into the UNESCO World Heritage listed center of Florence. The property occupies ten acres. During 2015, the property created a new function facility to cater to the popular wedding and celebrations market.
 
Belmond Hotel Caruso—50 keys—in Ravello is located on three hill-top acres overlooking the Amalfi coast near Naples and ancient Roman and Greek archeological sites such as Pompeii and Paestum. The Amalfi coast, the city of Naples and the archeological sites have been designated UNESCO World Heritage sites. Once a nobleman’s palace, parts of the building date

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back to the 11th century. Operated as a hotel for many years, Belmond rebuilt the property after acquiring it and reopened it in 2005. Amenities include two restaurants, a swimming pool, spa and extensive gardens.

Belmond Grand Hotel Timeo—70 keys—in Taormina, Sicily was purchased in January 2010 and renovated during winter closure periods since then. With panoramic views of Mount Etna (a UNESCO World Heritage site) and the Gulf of Naxos from its main terrace, this hotel is widely considered the most luxurious hotel in Taormina and is situated in the city center next to the second century Greek Theater. Built in 1873 on a total site of about ten acres, the hotel features a restaurant serving regional specialties, a spa and fitness center, swimming pool, and separate banqueting and conference facilities, all surrounded by six acres of parkland.
 
Belmond Villa Sant’Andrea—65 keys—was purchased and renovated at the same time as Belmond Grand Hotel Timeo. Built in 1830 on Taormina's Bay of Mazzarò with its own beach, the hotel has the atmosphere of a private villa set in lush gardens, a total site of about two acres, with many of the guest rooms and the hotel’s seafood restaurant and swimming pool looking onto the Calabrian coast. Belmond completed construction in May 2014 of six poolside suites. During the 2015-2016 winter closure, four new units are being built (three junior suites and one double room) in a prime location on the pool side of the property with stunning views of the Bay. Belmond Grand Hotel Timeo and Belmond Villa Sant’Andrea are linked by a shuttle service so that guests may enjoy the facilities at both hotels.
 
All of these Italian properties operate seasonally, closing for varying periods during the winter.
 
Spain

Belmond La Residencia—68 keys including a separate villa—is located in the charming village of Deià on the rugged northwest coast of the island of Mallorca with panoramic views of the Tramuntana Mountains, a UNESCO World Heritage site. The core of Belmond La Residencia was originally created from two adjoining 16th and 17th century country houses set on an owned hillside site of 30 acres. The hotel features two restaurants, including the gastronomic El Olivo, meeting rooms for up to 100 guests, two large swimming pools, tennis courts and a spa and fitness center with an indoor pool. In 2015, the property refurbished 12 junior suites and created a new bar. During the 2015-16 winter closure, the property commenced the first phase of the construction of six new suites with the opening of the new units scheduled for winter 2016-17.

Portugal
 
Belmond Reid’s Palace—163 keys—is a famous hotel on the island of Madeira, situated on ten acres of semitropical gardens on a cliff top above the sea and the bay of Funchal, the main port city. Opened in 1891, the hotel has five seasonal restaurants and banquet/meeting facilities. Leisure and sports amenities include fresh and sea water swimming pools, a third tide-filled pool, tennis courts, ocean water sports, a spa and fitness center and access to two championship golf courses. It has year-round appeal, serving both winter escapes to the sun and regular summer holidays.

United Kingdom
 
Belmond Le Manoir aux Quat’Saisons—32 keys—is located in a picturesque village in Oxfordshire, England about an hour’s drive west of London. The main part of the hotel is a 16th century manor house set in 27 acres of gardens. Each suite has an entirely individual design. The property was developed by Raymond Blanc, one of Britain’s most famous chef-patrons, and the hotel’s restaurant has two stars in the Michelin Guide. Mr. Blanc has given a four-year commitment to remain the chef patron at the hotel and advises the restaurants at other Belmond hotels. The hotel recently expanded its event and meeting space to increase its appeal to social and corporate groups.
 
Russia
 
Belmond Grand Hotel Europe—266 keys—in St. Petersburg was originally built in 1875. The hotel occupies one side of an entire city block on the fashionable Nevsky Prospect in the UNESCO World heritage listed heart of the city near the Russian Museum, Philharmonic Society, Mikhailovsky Theater and other tourist and cultural attractions as well as the commercial center.  There are three restaurants on the premises, as well as a grand ballroom, meeting facilities, a spa and fitness center, and several retail shops. Luxury historic suites reflect the rich history of the hotel and city, named after famous guests like Pavarotti, Stravinsky and the Romanov tsars. The City of St. Petersburg owns a 6.5% minority interest in the hotel building. Recent improvements include six ultra-luxury suites that opened in July 2014, a new concept restaurant by a top designer, and improved meeting and banqueting rooms. In 2016, the property is scheduled to commence renovations to its famous Krysha ballroom.
 

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Owned HotelsNorth America
 
United States
 
Belmond Charleston Place—434 keys—is located in the heart of historic Charleston, South Carolina, a popular destination for tourists and business meetings. Opened in 1986, the hotel has two restaurants, extensive banqueting and conference space including a grand ballroom, a spa, fitness center and rooftop swimming pool, and a shopping arcade of 25 retail outlets leased by third parties.  The hotel also owns the adjacent historic Riviera Theater remodeled as additional conference space and retail shops. In December 2015, the property completed a three-year phased refurbishment of all of its guest rooms. In 2016, the property is scheduled to refurbish a retail outlet space, converting it into an upscale sports bar with direct access to Market Street, a busy main street in Charleston, and its ballroom and conference facilities.
 
While Belmond has a 19.9% equity interest in Belmond Charleston Place, Belmond manages the property under an exclusive long-term contract and has a number of loans to the hotel outstanding. On evaluating its various interests in the hotel, Belmond has concluded that it is the primary beneficiary of this variable interest entity and, accordingly, consolidates the assets and liabilities of the hotel in Belmond’s balance sheets and consolidates the hotel’s results in Belmond’s statements of operations, comprehensive income and cash flows. See Note 5 to the Financial Statements.
 
Belmond El Encanto—92 keys—in Santa Barbara, California is located in the hills above the city center, with views over the Pacific Ocean. Dating from 1913, it sits in seven-acre landscaped gardens with heritage features and mature trees. Guest rooms are in authentic, California Rivera-style bungalows spread throughout the grounds. Belmond reopened the resort in 2013 following extensive renovation and it now includes an acclaimed restaurant, infinity-edge swimming pool, a destination spa and fitness center. Belmond El Encanto is Santa Barbara's only Forbes Five Star hotel.

‘21’ Club is Belmond's stand-alone restaurant, a famous landmark at 21 West 52nd Street in midtown Manhattan near the Broadway theater district and many top tourist attractions. Originally a speakeasy during Prohibition in the 1920s, this restaurant is open to the public, occupies three brownstone buildings and features fine American cuisine. It serves à la carte meals in the original bar restaurant and a separate dining room upstairs, and also has ten banqueting rooms used for receptions and events, including the famous secret wine cellar. Belmond added Bar ‘21’ on the restaurant’s ground floor lobby and reconfigured and expanded two event spaces on the first floor for private receptions.
 
Caribbean
 
Belmond La Samanna—91 keys including eight villas—is located on the island of St. Martin in the French West Indies.  Built in 1973, the hotel consists of several buildings on 16 acres of owned land along a 4,000-foot beach. Amenities include two restaurants, two swimming pools, a spa, tennis courts, fitness and conference centers, boating and ocean water sports, and extensive gardens. The hotel is open most of the year, seasonally closing during the autumn months. In recent years, Belmond has renovated many of the guest rooms and the main restaurant, bar and lobby area. The eight luxury villas located on part of the 35 acres of owned vacant land adjoining Belmond La Samanna provide additional villa-suite room stock for the hotel. Remaining land is available for future expansion.
 
Mexico
 
Belmond Maroma Resort and Spa—63 keys—is on Mexico’s Riviera Maya on the Caribbean coast of the Yucatan Peninsula, about 30 miles south of Cancun. The resort opened in 1995 and is set in 25 owned acres of verdant jungle along a 1,000-foot beach. The Cozumel barrier reef is offshore where guests may fish, snorkel and scuba-dive. Important Mayan archeological sites are nearby. Rooms are arranged in low-rise villas and there are three restaurants, three swimming pools, tennis courts and spacious spa facilities. Belmond also owns a 28-acre tract adjacent to Belmond Maroma Resort and Spa for hotel expansion or construction of other improvements.
 
Belmond Casa de Sierra Nevada—37 keys—is a luxury resort in the colonial town of San Miguel de Allende, a UNESCO World Heritage site. Opened in 1952, the hotel consists of nine owned Spanish colonial buildings built in the 16th and 18th centuries.  Belmond has renovated the hotel, including its restaurant, and has built new suites as well as a swimming pool, spa and garden area. The total site is approximately two acres. Belmond also owns a nearby cooking school and retail shop operated in conjunction with the hotel.
 

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Owned HotelsRest of World
 
South America
 
Belmond Copacabana Palace—239 keys—was built in the 1920s on a three-acre owned site facing Copacabana Beach near the central business district of Rio de Janeiro, Brazil. It is a famous hotel in South America and features two fine-dining restaurants, 13 function rooms hosting up to 1,300 guests, including the hotel’s refurbished former casino rooms, a 25 meter long swimming pool, spa and fitness center, and a roof-top tennis court and a private rooftop plunge pool for the penthouses. In December 2012, Belmond completed a two-year phased refurbishment of the guest rooms in the main building including an expanded and restyled lobby and, in early 2014, converted one of the hotel's bars into a new pan-Asian restaurant. Third parties own a less than 2% minority interest in the hotel.
 
Belmond Hotel das Cataratas—193 keys—is located beside the famous Iguassu Falls in Brazil on the border with Argentina, a UNESCO World Heritage site. Belmond was awarded in 2007 a 20-year lease of the hotel from the government. It is the only hotel in the national park on the Brazilian side of the falls. First opened in 1958 on about four acres, the hotel has two restaurants, two bars, conference facilities, a swimming pool, spa, fitness center and tennis court, and tropical gardens looking onto the falls. Belmond had applied in 2009 to the Brazilian Ministry of Planning, Budget and Management for an amendment of the lease, but the Secretary of the Ministry denied the application in September 2014. Belmond has appealed the Secretary's decision to the Ministry, which the Ministry has yet to address through its administrative process. See "Item 3—Legal Proceedings."
 
Belmond Miraflores Park—81 keys—is located in the fashionable Miraflores residential district of Lima, Peru. This all-suite owned hotel, occupying about an acre of land, faces the Pacific Ocean and is conveniently located for the city's commercial and cultural centers. Following a 5 month closure for a $7,500,000 renovation project, Belmond reopened the hotel in April 2014 with refreshed guest accommodations, conference facilities and public areas. The hotel features two restaurants, large banqueting and meeting rooms and an exclusive lounge for guests staying on the upper floors. Leisure facilities include a spa, gym and rooftop swimming pool with ocean views. During 2016, the property is intending to convert former office space on its third floor into eight executive guest rooms.
 
Africa
 
Belmond Mount Nelson Hotel—198 keys—in Cape Town, South Africa is a famous historic property opened in 1899. With beautiful gardens and pools, it stands just below Table Mountain and is within walking distance of the main business, civic and cultural center of the city. The hotel has two restaurants, a ballroom, two swimming pools, tennis courts, a spa and fitness center, and a business center with meeting rooms, all situated on ten acres of owned grounds. In 2012, Belmond renovated 30 guest rooms and the restaurant overlooking the main swimming pool and gardens and, in 2013, refurbished an additional 36 guest rooms. In 2014, Belmond refurbished eight junior suites and 18 suites, including its eight garden cottages. In 2015, the hotel's original ballroom and three conference rooms were renovated. The hotel has expansion potential through conversion of adjacent owned residential properties.
 
Belmond Khwai River Lodge, Belmond Eagle Island Lodge and Belmond Savute Elephant Lodge—39 keys in total—comprise Belmond’s African safari experience in Botswana consisting of three separate game-viewing lodges. Established in 1971, Belmond holds leases to the lodge sites in the Okavango River delta and nearby game reserves, where African wildlife can be observed from open safari vehicles or boats. The leases expire between 2021 and 2041. Botswana's Okavango Delta was added to the UNESCO World Heritage list in June 2014. Each camp has 12 or 15 luxury one bedroom tents under thatched roofs, and guests travel between the camps by light aircraft. Boating, fishing, hiking and swimming are offered at the various sites. In January 2015, Belmond closed Belmond Eagle Island Lodge to undertake a full refurbishment of the property, which re-opened in November 2015.

Asia
 
Belmond Napasai—69 keys including 14 private villas—is located on its own beach on the north side of Koh Samui island of Thailand in the Gulf of Siam. It originally opened in 2004 and features two restaurants, tennis courts, a swimming pool, a spa and water sports such as sailing, diving and snorkeling in the nearby coral reef. The guest rooms are arranged in seaview and garden cottages on a total site of about 40 owned acres, which include vacant land for future expansion. The villas, most of which are owned by third parties, are available for rent by hotel guests.
 
Belmond Jimbaran Puri—64 keys including 22 villas—is on the island of Bali in Indonesia and occupies seven beachfront acres under long-term lease through 2050 on the south coast of the island. Guest rooms are situated in cottages, and there are two restaurants, a spa, swimming pool and ocean water sports. Each villa has its own private plunge pool.

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Ubud Hanging Gardens—38 keys—also on Bali is located on terraces on about seven steep hillside acres above the Ayung River gorge in the rain forest interior of the island. This long-term leased hotel opened in 2005 and offers two restaurants, a swimming pool and spa, and a free shuttle bus to the nearby town of Ubud, a cultural and arts center. Each key has its own private plunge pool.

As previously reported, following an unannounced dispossession of Belmond from Ubud Hanging Gardens by the third-party owner in November 2013, Belmond was unable to continue operating the hotel. Belmond believed this action by the owner was unlawful and in breach of its long-term lease arrangement and constituted a wrongful dispossession. Accordingly, Belmond is taking appropriate legal steps to protect its interests. See Item 3—Legal Proceedings.
 
Belmond La Résidence d’Angkor—62 keys—opened in 2002 and is situated in walled gardens in Siem Reap, Cambodia. The hotel occupies a site of about two acres under long-term lease until 2066. The ancient Temples of Angkor Wat, a UNESCO World Heritage site and the principal tourist attraction in the area, are nearby. The hotel has two indoor/outdoor restaurants, swimming pool, and a spa and fitness center. The property has commenced a complete renovation of its guest rooms, expected to be completed during 2016.
 
Belmond Governor’s Residence—49 keys—was built in the 1920s in the embassy district of Yangon, Myanmar (Burma) originally as the official home of one of the Burmese state governors and near the great Shwedagon pagoda in the city. The building is a two-story teak mansion surrounded by verandas overlooking lotus gardens on a site of about two acres leased until 2067. Belmond Governor's Residence opened as a hotel in 1997. It includes two restaurants and swimming pool.
 
Belmond La Résidence Phou Vao—34 keys—is in Luang Prabang, the ancient capital of Laos and a UNESCO World Heritage site. Belmond owns a 69% interest in the entity which owns the property. The hotel opened in 2001 and occupies about eight hillside acres under long-term lease until 2028. Guest rooms are in four two-story buildings surrounded by lush gardens that include a restaurant, spa and swimming pool.
 
Part-Owned/Managed Hotels

Hotel Ritz by Belmond—As noted in the "Introduction" above and in Note 6 to the Financial Statements, in May 2015, Belmond, together with its joint venture partner, each sold their 50% ownership in the entity which owned the Hotel Ritz by Belmond, Madrid, Spain. Belmond and its joint venture partner sold the shares in the entity that owns the hotel for gross proceeds of €130,000,000 ($144,529,000 at date of sale). As a condition of the sale, Belmond’s management contract with Hotel Ritz by Belmond was terminated, resulting in the receipt of a termination fee of $2,292,000.

United States

Inn at Perry Cabin by Belmond—78 keys—was built in 1812 as a country inn located in St. Michaels, Maryland on the eastern shore of Chesapeake Bay. Set on 25 waterfront acres, it is an attractive conference and vacation destination, particularly for guests from the Washington, D.C., Baltimore and Philadelphia areas. During its ownership, Belmond expanded the hotel by adding guest rooms, a conference facility, a swimming pool and spa.

As noted in the "Introduction" above, Belmond completed the sale of Inn at Perry Cabin in March 2014 for gross proceeds of $39,700,000 and at the same time, entered into a ten-year management agreement (that permits termination on the fifth anniversary of the agreement) with the owner under which Belmond operates the property as Inn at Perry Cabin by Belmond. As part of the management agreement, Belmond funded $3,000,000 of key money to be used for agreed capital enhancements.

Peru

Belmond has a 50%/50% joint venture with local investors in Peru which operates the following four hotels under Belmond’s exclusive management.
 
Belmond Hotel Monasterio—122 keys—is located in the ancient Inca capital of Cusco, an important tourist destination in Peru and a UNESCO World Heritage site. The hotel was originally built as a Spanish monastery in the 16th century, converted to hotel use in 1965, and has been upgraded since then. The guest rooms and two restaurants are arranged around open-air cloisters. Many of the guest rooms are specially oxygenated due to Cusco's high altitude. In 2013, Belmond commenced a three-year phased renovation of guest rooms and bathrooms. The site measures approximately three acres under long-term lease until 2037, with options to renew until 2067.
 

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Belmond Palacio Nazarenas—55 keys—is located next door to Belmond Hotel Monasterio on the same site in Cusco and is a former palace and convent which the joint venture, using its own financial resources, has rebuilt as a separate hotel and opened in June 2012. This is an all-suite hotel arranged around courtyards and featuring oxygenated guest rooms, an outdoor heated swimming pool, spa, and poolside restaurant and bar. During construction, archeologists discovered Incan artifacts and foundations which have been preserved and displayed in the hotel. The property is subject to a lease until 2042, with an option to renew until 2067.

Belmond Sanctuary Lodge—31 keys—is the only hotel at the famous mountaintop Inca ruins at Machu Picchu, a UNESCO World Heritage site. All of the rooms have been refurbished to a high standard. In 2014, Belmond commenced a three-year phased renovation of all guest rooms and suites, as well as the hotel's reception and public areas. The joint venture long-term leases the hotel as well as seven acres for possible future expansion at the foot of the ruins, close to the town on the Urubamba River where tourists arrive by train. The lease has been extended to 2025. See also Item 3—Legal Proceedings.
 
Belmond Hotel Rio Sagrado—23 keys including two villas—is owned by Belmond's Peru hotel joint venture and is located in the Sacred Valley of the Incas between Cusco and Machu Picchu. Opened in 2009, this rustic hotel has a spa with indoor plunge pool and extensive gardens beside the Urubamba River on a site of about six acres set against an imposing mountain backdrop.  The Sacred Valley is a popular part of holiday itineraries in Peru, and a station on Belmond’s PeruRail train service is a short distance from the hotel. During 2013, the joint venture refurbished the guest rooms, enlarged the spa and installed an outdoor heated swimming pool. In 2014, the property enhanced the main entry arrival with new entry drive and landscape improvements and added a train platform/lounge to accommodate Hiram Bingham train guests stopping at the hotel. In 2015, the joint venture acquired an adjacent parcel of land of approximately two and a half acres on which the joint venture is contemplating further development.

Owned Trains and Cruises
 
Venice Simplon-Orient-Express comprises 18 historic railway cars, all of which have been refurbished in original 1920s/1930s décor and meet modern safety standards. It operates once or twice weekly principally between multiple cities and Venice from March to November each year via Paris, Zurich and Innsbruck on a scenic route through the Alps. The journey from London to Venice departs from London Victoria station on the Belmond British Pullman train; passengers then cross the English Channel by coach on the Eurotunnel shuttle train. Occasional trips are also made to Vienna, Prague, Berlin, Copenhagen, Stockholm, Budapest and Istanbul. During 2015, the bar was completely refurbished and as of early 2016, the train commenced a two-year project to add air-conditioning to its four public carriages and all of its guest rooms. Venice-Simplon-Orient-Express is made up of three dining cars, one bar car and sleeper cars carrying up to 182 passengers in 85 double and 12 single cabins. Venice Simplon-Orient-Express is also available for charter by private groups.
 
Belmond British Pullman consists of 11 Pullman dining cars in Britain which operate all year originating out of London on short excursions to places of historic, scenic or sporting interest in southern England, including some overnight trips when passengers stay at local hotels. Full fine dining is offered on every departure.
 
Belmond Northern Belle is a tourist train offering day trips and charter service principally in the north of England.  It builds on the success of Belmond’s British Pullman business, which focuses on the south of England around London. This train consists of seven owned dining cars elegantly decorated to be reminiscent of old British “Belle” trains of the 1930s, plus three kitchen and service cars, and can carry up to 276 passengers. Fine dining is served on board and passengers stay in local hotels on overnight itineraries.
 
Belmond Royal Scotsman is a luxury sleeper train owned by Belmond comprises nine Edwardian-style cars, including five sleeping cars (each compartment with private bathroom), two dining cars and a bar/observation car, and accommodates up to 36 passengers. Operating from April to October, the train travels on itineraries of up to seven nights through the Scottish countryside affording passengers the opportunity to visit clan castles, historic battlegrounds, famous Scotch whiskey distilleries and other points of interest. During 2016, an additional car will be added to the train and will include a spa and four additional berths.

Belmond Road to Mandalay is a luxury river cruise ship on the Ayeyarwady (Irrawaddy) River in central Myanmar.  The ship was a Rhine River cruiser built in 1964 that Belmond bought and refurbished. It has 43 air conditioned cabins with private bathrooms, spacious restaurant and lounge areas, and a canopied sun deck with swimming pool. The ship travels between Mandalay and Bagan up to eight times each month and carries up to 82 passengers who may enjoy sightseeing along the river and guided shore excursions to places of cultural interest. Three- to 11-night itineraries are offered. The ship does not operate in the summer months and occasionally when the water level of the river falls too low due to lack of rainfall. During 2015, the top deck barbeque and bar venues were refurbished.


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Belmond Orcaella, Belmond's second river cruise ship in Myanmar, was built in Yangon to Belmond's luxury standards and launched in July 2013. The ship is named after the dolphins found in the inland waterways of the country, and accommodates up to 50 passengers in 25 spacious river-facing cabins, with restaurant, lounge and bar, and sundeck with plunge pool. It cruises between Yangon and the far north of Myanmar on the Ayeyarwady and Chindwin Rivers on seven- to 11-night itineraries to areas accessible to Belmond Orcaella because of its shallow draft and maneuverability. The ship is subject to a five-year charter that expires in 2018 and the Company holds an option to renew the charter for an additional five years.
 
Belmond Afloat in France is composed of five luxury river and canal boats (called péniche-hôtels) owned by Belmond and operating in Burgundy, Provence and other rural regions of France. They accommodate between four and 12 passengers each in double berth compartments with private bathrooms, and some have small plunge pools on deck. They operate seasonally between April and October on three- to six-night itineraries with guests dining on board or in nearby restaurants. Shore excursions are organized each day.

All Belmond trains and cruises are available for private charter.

Part-Owned/Managed Trains

PeruRail: Belmond and local Peruvian investors formed two 50%/50% owned companies (PeruRail S.A. and Ferrocarril Transandino S.A., together "PeruRail"), as a joint venture that was awarded in 1999 a 30-year franchise to operate the track and other infrastructure of the state-owned railways in southern and southeastern Peru and a license to operate passenger and freight services in those areas. The franchise may be extended every five years upon PeruRail's application and government approval, and currently expires in 2034 with four additional five-year extensions remaining. PeruRail pays the Peruvian government fees related to traffic levels and the use of rail infrastructure, locomotives and rolling stock. The 70-mile Cusco-Machu Picchu line, carrying mainly tourists as well as local passenger traffic, is the principal means of access to the famous Inca ruins at Machu Picchu because there is no convenient road. Other carriers operate on this line in competition with PeruRail. A second rail line runs from Cusco to Matarani on the Pacific Ocean (via Arequipa) and to Puno on Lake Titicaca, and principally serves freight traffic under contract, an activity PeruRail is expanding by hauling the output of local copper mines in southern Peru to the Pacific port for export. See "Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations—Year on Year Comparisons—Year ended December 31, 2015 compared to year ended December 31, 2014 and year ended December 31, 2014 compared to year ended December 31, 2013—Part-Owned/Managed trains, 2015 compared to 2014". The Cusco-Machu Picchu line connects four of Belmond’s Peruvian hotels, allowing inclusive tours served by Belmond’s Hiram Bingham luxury daytime tourist train composed of two dining cars and a bar/observation car with capacity up to 84 passengers.  PeruRail also operates a daytime tourist train called the Andean Explorer on the Cusco-Puno route through the High Andes mountains.
 
Eastern & Oriental Express: During its operating season, the Eastern & Oriental Express offers a round trip each week between Singapore, Kuala Lumpur and Bangkok. The journey includes two or three nights on board and side trips to Penang in Malaysia and the River Kwai in Thailand. Some overnight trips are also made from Bangkok to Chiang Mai and elsewhere in Thailand and to Vientiane, Laos. Longer itineraries, up to six nights on board, are offered to places of historic, scenic and cultural interest in the region. Originally built in 1970, the 24 cars were substantially refurbished in an elegant Asian décor and fitted with modern facilities such as air conditioning and private bathrooms. The train is made up of sleeping cars, three restaurant cars, a bar car and an open air observation car and can carry up to 130 passengers. The Eastern & Oriental Express is available for charter by private groups. Belmond manages the train and has a 25% shareholding in the owning company.

Management Strategies
 
As the foregoing indicates, Belmond has a global mix of luxury hotel and travel products that are geographically diverse and appeal to both high-end individual travelers as well as prominent meeting, incentive, and social groups. Individual travelers in 2015 made up approximately 71% of total hotel room nights, with meeting, social, and incentive groups accounting for the remaining 29%. Belmond’s properties are distinctive as well as luxurious and tend to attract guests prepared to pay higher rates for the travel experiences and high-quality service Belmond offers compared to its competitors.
 
Belmond benefits from long-term trends and developments favorably impacting the global hotel, travel and leisure markets, including growth trends in the luxury hotel market in many parts of the world, increased travel and leisure spending by consumers, favorable demographic trends in relevant age and income brackets of U.S., European and other populations, and increased online travel bookings. 
 
Belmond’s vision is to continue to be the consummate luxury experiential travel company, providing guests with a window into authentic, 'one-of-a-kind' experiences in some of the most unique destinations in the world. Belmond plans to grow the business by focusing on three key areas:

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Driving top- and bottom-line growth at the Company's existing businesses -- Belmond plans to continue owning or part-owning and operating most of its existing properties, which allows Belmond to develop each product's distinctive local character and to benefit from current cash flow and potential future gains on sale. Belmond considers its combined owner/operator role as efficient and consistent with the long-term nature of its assets. Self-management or management with equity interest has enabled Belmond to capture the economic benefits otherwise shared with a third-party manager, to control the operations, quality and expansion of the hotels, and to use its experience with market adjustments, price changes, expansions and renovations to improve cash flow and enhance asset values. The Company continues to emphasize increasing revenue and earnings at its established and recently opened properties, including by increasing occupancy and ADR while controlling costs associated with incremental revenue, investing in capital improvements at existing hotels and expanding where land or space is available, in both cases when potential investment returns are relatively high and operating costs are low, and increasing the utilization of its trains and cruises by adding departures and, for PeruRail, expanding its contract freight business.

Stepping up the Company's efforts to continue to build brand awareness -- Many of Belmond’s individual properties, such as Belmond Hotel Cipriani, Belmond Grand Hotel Europe, Belmond Copacabana Palace, Belmond Mount Nelson Hotel and ‘21’ Club, have distinctive local character and strong brand identity. In the past, Belmond had promoted its individual hotel properties and the Venice Simplon-Orient-Express train through the “Orient-Express" sub-brand which originated with the legendary luxury European train in the late 19th and early 20th centuries. In 2014, the Company elected to migrate to a "forward-brand" strategy and now markets its collection under Belmond. The adoption of the Belmond brand is intended to increase consumer recognition of the broad scope of the Company's unique collection of luxury hotels and travel experiences, thereby increasing multi-property visits and enhancing revenue growth, and to heighten awareness of the entire portfolio of individual properties among existing and potential new guests. Management also expects this approach will make Belmond attractive to third-party owners thereby facilitating the strategy of expanding into third-party management of properties that complement Belmond's existing portfolio. In adopting the Belmond brand, the Company is now investing in a portfolio brand that it owns and controls and its strategy includes positioning the brand to become the brand of choice for its niche among luxury travelers. Belmond has retained its long-term license agreement with SNCF, the French transportation company that owns the "Orient-Express" trademark, for the Venice Simplon-Orient-Express train. With the decision to introduce the Belmond brand, Belmond also entered into an agreement with SNCF to terminate (with effect from December 31, 2014) the "Orient-Express" license for hotel use, without any cost or penalty.
 
Management believes that the Belmond brand aids in increasing business through enhanced repeat guest and cross-brand visitation for the Company's most valuable customers, increased group business in need periods from meeting planners, increased leisure business from luxury travel agents, and the acquisition of new customers through exposure from marketing, public relations and advertising programs.

Positioning the Company for footprint expansion -- Belmond also plans to invest in and manage additional distinctive luxury properties and other desirable leisure destinations. Factors in Belmond’s evaluation of a potential acquisition, lease or management opportunity include the uniqueness and luxury nature of the property or product, attractive risk-adjusted financial returns, attractions and experiences for guests in the vicinity, upside potential through pricing, expansion or improved sales and marketing, limitations on nearby competition, and convenient access.
 
Belmond also plans to pursue long-term contracts to manage hotels owned by others principally on a fee basis. These contractual arrangements may include cash, loan or other investment, including key money, by Belmond in connection with renovating or converting a property to meet Belmond's standards and to align Belmond's interest as an operator with the owner. Management agreements would facilitate Belmond’s entry into new markets, such as gateway cities in the Americas, Europe, Asia and the Middle East, and allow Belmond to conserve investment capital. As owner of many unique and luxury properties that Belmond operates itself, Belmond believes it is well positioned to manage comparable hotels for others.
 
Other strategic considerations -- In recent years, management executed on a strategy to reduce Belmond’s long-term debt position. A number of assets not considered key to Belmond’s portfolio of unique, high-valued properties were identified and sold with proceeds being used to reduce debt, re-invest in other properties, and more recently to repurchase the Company's class A common shares. In the last four years, Belmond has sold its 50% ownership in the entity which owned Hotel Ritz by Belmond, Madrid, Spain, Inn at Perry Cabin by Belmond in Maryland, the Porto Cupecoy property development in Sint Maarten, The Westcliff in Johannesburg, The Observatory Hotel in Sydney, Bora Bora Lagoon Resort in French Polynesia, and Keswick Hall in Virginia for combined total proceeds of $196,295,000, and has removed any debt related to these properties from its consolidated balance sheets. See Note 4 to the Financial Statements. Management continues to review Belmond's portfolio to identify additional non-core assets and expects that any future asset sales

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would be encumbered by long term management agreements for Belmond. At the same time, Belmond has restructured its remaining long-term debt. See Item 7—Management’s Discussion and Analysis of Financial Condition and Results of Operations.

Marketing, Sales and Public Relations
 
Belmond invested $3,900,000 in enhanced promotional and marketing initiatives in 2015 and plans to invest approximately $4,000,000 during 2016 as phase two of its five year strategy to invest approximately $15,000,000 in support of the Belmond brand.
 
Belmond’s sales and marketing function is primarily based upon direct sales to consumers of travel (prioritizing strategic third-party travel agents, sales representatives and tour operators, and electronic channels such as the Internet and digital marketing), cross-selling to existing customers, and public relations. Belmond has its own corporate sales force located in 16 cities in the U.S., Brazil, Mexico, various European countries, Australia and Japan, and has appointed third-party sales representatives in ten additional cities in Asia and the Middle East. Belmond also has local sales staff responsible for the properties where they are based.
 
Belmond’s sales staff identify and train preferred travel industry and distribution partners, engage with group and corporate account representatives, and conduct marketing initiatives such as direct mailings, e-commerce, trade show participation and event sponsorship. Revenue is managed using sophisticated room rate and inventory tools. Belmond participates in a number of luxury travel partner programs, such as the “Fine Hotels & Resorts" and "Centurion Hotel Program", both operated by American Express, and the “Virtuoso” travel agent consortium. Belmond offers its top travel agents and other industry partners "by invitation only" participation in Belmond’s “Bellini Club” providing training courses, special commissions and sales support for all Belmond products worldwide.
 
Consumer advertising, websites and digital marketing are important direct sales and marketing tools for Belmond. Through its principal website (belmond.com), Belmond provides extensive descriptions and images of the products and guest activities in English and five other languages, in addition to bookings and brand wide promotions. Belmond operates other Internet special interest travel portals that direct customers to Belmond’s properties, and works with other selected electronic distribution channels.  Social media such as Facebook, Twitter, YouTube, Instagram and Pinterest are increasingly significant marketing tools.
 
Because repeat customers appreciate the consistent quality of Belmond’s hotels, trains and cruises, an important part of Belmond’s strategy is to promote Belmond properties through various cross-selling efforts to engage with Belmond's loyal customer base. These include gifts cards, "Belmond" magazine, "Belmond Now" digital magazine in-house directory, customer relationship management systems and other customer recognition programs, worldwide preferred travel agent programs, and direct communications with customers.
 
Belmond’s marketing strategy also focuses on public relations, which management believes is a highly cost-effective marketing tool for luxury properties. Because of the unique nature of Belmond’s properties, guests often hear about Belmond’s hotels and other travel products through word-of-mouth or published articles. Belmond has an in-house public relations office in London and representatives in 11 countries worldwide, including third-party public relations firms under contract, to promote its properties through targeted newspapers, general interest and travel magazines, and broadcast, online and other media.

Corporate Social Responsibility
 
Belmond is committed to the implementation of responsible business practices furthering the sustainability of tourism and seeks to ensure that its properties and corporate offices engage with their local communities and environments in a positive manner through their ongoing activities. Examples of these are as follows:

In 2015, Belmond continued its association with the Sustainable Restaurant Association ("SRA") for a second year. The food and beverage operations of 39 of Belmond's properties were assessed to measure and benchmark their sustainability credentials. Belmond is the first global luxury hospitality brand to have undertaken this third party testing by the SRA. This third party testing will continue to inform Belmond's minimum food sustainability, environmental responsibility and ethical sourcing standards during the coming year.

In Myanmar, the ship doctors of Belmond Road to Mandalay and Belmond Orcaella run community activities along the Ayeyarwady River in a program dating back 20 years. These include a free clinic that treats thousands of people each year, the construction and long-term support of schools, and irrigation and solar power projects in remote villages.


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In Russia, Belmond Grand Hotel Europe works with local orphanages and youth organizations to support those in need. The hotel arranges educational tours of its premises for college students and organizes community activities for disadvantaged young people.

In the U.S., Belmond Charleston Place created and continues to coordinate the Charleston Chefs’ “Feed the Need” Program in which local hotels, restaurants and caterers provide weekly meals in food shelters for up to 500 persons -- a program since adopted in other U.S. cities. The hotel has now introduced a "Teach the Need" program, teaching hospitality skills to at-risk high school students and helping them find employment. It also organized an auction that raised over $600,000 for those affected by the Emanuel AME Church tragedy in 2015.

In Brazil, Belmond Copacabana Palace has continued to develop the sustainability and community programs it initiated in 2009 and the long-standing community programs it formalized in 2012. It now recycles more than 50% of its waste, uses 100% renewable energy, works with sustainable food and flower suppliers and supports Solar Meninos de Luz, a local children's philanthropic organization.

Also in Brazil, Belmond Hotel das Cataratas is committed to environmental conservation programs including Carnivores of Iguassu, which has overseen a substantial rise in numbers of endangered animals such as pumas and jaguars within the surrounding national park. The hotel also sponsors a local young people's training program offering youth apprenticeships and work placements for disadvantaged young people. The hotel is committed to environmental conservation and ecological operating programs and was the first South American hotel to be certified for ISO14001– Sustainability and SA8000–Social Responsibility.

In Thailand, Belmond Napasai participates in a number of environmental projects which have included efforts to maintain the eco-system of a local reef and the planting of mangrove and coconut trees in areas affected by recent infestations.
   
In Peru, Belmond Sanctuary Lodge operates an agriculture school on its own land in order that individuals from poor neighboring communities can learn to grow vegetables which the hotel purchases at fair trade prices. Belmond Hotel Monasterio has also established a fair trade alliance with a Sacred Valley farming community. Other Belmond hotels in Peru have participated in community programs that have included projects to plant thousands of trees and to clean waste from riverside areas. 

Also in Peru, Belmond Hotel Rio Sagrado has teamed with the local community with respect to various local community initiatives, including, among them, planting 3,000 native trees in a deforested area and removing four tons of waste from a river near the hotel. In addition, for the past ten years, Belmond Hotel Monasterio has partnered in a fair trade alliance with a farming community in the Sacred Valley near the hotel.

Belmond Reid's Palace staff volunteer twice a year in campaigns to support a local food bank. The hotel also supports charities for children with cancer and local organizations for disadvantaged young and elderly people.

Belmond offers all full-time staff in its London office the opportunity to use up to 14 hours, or two working days, a year to participate in volunteer projects that benefit its local Bermondsey community. Activities have included converting neglected "gray" outdoor spaces into community kitchen gardens, mentoring local residents in business skills and working with a learning disabilities group.

Industry Awards
 
Belmond has gained a worldwide reputation for quality and service in the luxury segment of the leisure and business travel markets.  Over the years, Belmond’s properties have won numerous national and international awards given by consumer or trade publications such as Condé Nast Traveller, Travel + Leisure, The Sunday Times (UK) and Forbes.com and by private subscription newsletters such as Andrew Harper’s Hideaway Report, or industry bodies such as TripAdvisor and Leading Hotels of the World. The awards are based on opinion polls of the publications’ readers or the professional opinions of journalists or panels of experts. The awards are believed to influence consumer choice and are therefore highly prized.
 
Competition
 
Some of Belmond’s properties are located in areas with numerous competitors. Competition for guests in the hospitality industry is based generally on the convenience of location, the quality of the property and services offered, room rates and menu prices, the range and quality of food services and amenities offered, types of cuisine, and reputation and name recognition.
 

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Belmond’s strategy is to acquire, invest or manage only hotels which have special locations and distinctive character, offering unique travel experiences. Many are in areas with interesting local history or high entry barriers because of zoning restrictions.  Belmond builds its competitive advantage by offering high quality service and cuisine, usually with a local flavor. Typically, therefore, Belmond competes by providing a special combination of location, character, cuisine, service and experiential activities rather than relying on price competition.
 
Belmond’s luxury tourist trains have no direct competitors at present. Other passenger trains operate on the same or similar routes, including the Cusco-Machu Picchu line of PeruRail, but management believes Belmond’s trains and onboard service are unique and of such superior quality that guests consider a Belmond train journey more of a luxury experience and an end in itself than merely a means of transport.
 
Employees
 
Belmond currently employs approximately 8,200 full-time-equivalent persons.  Approximately 6,000 persons are employed in the hotels, 2,100 in the trains and cruises business, and 122 in central administration, sales and marketing and other activities.  Management believes that Belmond’s ongoing labor relations are satisfactory. Through its various training and other human resources programs, Belmond seeks to attract, develop and retain top employees providing authentic local experiences to guests and to promote internal candidates for leadership positions.

Government Regulation
 
Belmond and its properties are subject to numerous laws and government regulations such as those relating to the preparation and sale of food and beverages, liquor service, health and safety of premises and employees, data privacy, employee relationships and welfare, environmental matters, waste and hazardous substance handling and disposal, and planning and zoning rules.

ITEM 1A.       Risk Factors
 
Belmond’s business is subject to various risks, including those described below. Investors should carefully consider the “Risk Factors” below. These are separated into three general groups:
 
risks of Belmond’s business,
 
risks relating to Belmond’s financial condition and results of operations, and
 
risks of investing in class A common shares.
 
The risks described below are those that management considers to be the most significant for purposes of Item 503(c) of Regulation S-K.

If any of these risks occurs, Belmond’s business, prospects, financial condition, results of operations and/or cash flows could be materially adversely affected. When Belmond states below that a risk may have a material adverse effect, this means the risk may have one or more of these effects. In that case, the market price of the class A common shares could decline.
 
Risks of Belmond’s Business
 
Belmond’s operations are subject to adverse factors generally encountered in the international lodging, hospitality and travel industries.
 
In addition to the specific conditions, risks and uncertainties discussed in the risk factors below and under Item 7—Management's Discussion and Analysis, these adverse factors include:
 
cyclical downturns arising from changes in economic conditions and general business activities in the United States and European and other countries which impact levels of travel and demand for travel products,
 
rising travel costs such as increased air travel fares and higher fuel costs, and reduced capacities of airlines and other transport services to specific destinations,
 
political instability of the governments of some countries where Belmond’s properties are located, resulting in depressed demand,

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less disposable income of consumers and the traveling public,
 
dependence on varying levels of tourism, business travel and corporate entertainment,
 
changes in popular travel patterns,
 
competition from other hotels, trains, cruises and leisure time activities,
 
periodic local oversupply of guest accommodation in specific locations, which may adversely affect occupancy and actual room rates achieved,
 
increases in operating costs at Belmond’s properties due to inflation and other factors which may not be offset by increased revenues,
 
economic and political conditions affecting market demand for travel products, including recessions, civil disorder, diplomatic relations, and acts or threats of terrorism,

foreign exchange rate movements causing fluctuations in reported revenues, costs and earnings and impacting demand for Belmond's properties,

failure to comply with applicable anti-corruption laws or trade sanctions, exposing Belmond to claims for damages, financial penalties and reputational harm,

restrictive changes in laws and regulations applicable to zoning and land use, labor and employment, health, safety and the environment, and related governmental and regulatory action,

costs and administrative burdens associated with compliance with applicable laws and regulations relating to privacy and customer and employee personal data protection, licensing, labor and employment, and other operating matters,

changing national and local governmental tax laws and regulations, which may increase the taxes Belmond is required to pay,

expropriation or nationalization of properties by foreign governments, and limitations on repatriation of local earnings or withdrawal of local investment,

availability and cost of capital to fund construction, renovations and investments,
 
adverse weather conditions such as severe storms that may temporarily impact demand, destructive forces like fire or flooding that may result in temporary closure of properties, water levels that may impact the Company's cruise operations, or landslides or engineering works that may impact train operations,
 
reduction in domestic or international travel and demand for Belmond’s properties due to actual or threatened acts of terrorism or war, or actual or threatened outbreak of contagious disease, and heightened travel security measures and restrictions instituted in response to these events,

interference with customer travel due to accidents or industrial action, increased transportation and fuel costs, and natural disasters,

with regard to Belmond's hotel management agreements, compliance by Belmond as manager with its contractual performance and financial obligations, maintenance of satisfactory relationships between Belmond as manager and the property owner, and the property owner's ability to meet financial requirements in the contracts such as necessary capital expenditure,
 
seasonality, in that many of Belmond’s hotels and tourist trains are located in the northern hemisphere where they operate at low revenue or close during the winter months, and

reliance on third parties to haul the Belmond owned carriages comprising the Company's luxury train businesses.
 

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The effects of many of these factors vary among Belmond’s hotels and other properties because of their geographic diversity. The global economic downturn in 2008 and 2009 preceded by the shock of terrorist attacks and resulting public concerns about travel safety, regional conflicts in Iraq, Afghanistan, Ukraine and Crimea, as well as in Thailand and other parts of the world, and the threatened flu and Ebola epidemics had, and the outbreak of the Zika virus may have, varying adverse effects on Belmond's results of operations.
 
If revenue decreases at Belmond’s properties, its expenses may not decrease at the same rate, thereby adversely affecting Belmond’s profitability and cash flow.
 
Ownership and operation of Belmond’s properties involve many relatively fixed expenses such as personnel costs, interest, rent, property taxes, insurance and utilities. If revenue declines when demand weakens, Belmond may not be able to reduce these expenses to the same degree to preserve profitability.
 
The hospitality industry is highly competitive, both for customers and for acquisitions of new properties.
 
Some of Belmond’s properties are located in areas where there are numerous competitors seeking to attract customers, particularly in city centers and resort locations. Competitive factors in the hospitality industry include:
 
convenience of location,
 
the quality of the physical property and services offered,
 
room rates and menu prices,
 
the range and quality of food services and amenities offered,
 
types of cuisine, and

reputation and name recognition.
 
New or existing competitors could significantly lower rates or offer greater conveniences, services or amenities, or significantly expand, improve or introduce new facilities and amenities in the markets where Belmond operates, thereby adversely affecting profitability. Also, demographic, geographic or other changes in one or more of Belmond’s markets could impact the convenience or desirability of its hotels and so could adversely affect their operations and Belmond's local market share.
 
Belmond competes for hotel acquisition and management agreement opportunities with others such as real estate investors and hotel operators. These competitors may be prepared to accept lower levels of financial return or a higher level of financial risk than Belmond can prudently manage. This competition may have the effect of reducing the number of suitable acquisition, lease and management agreement opportunities offered to Belmond or on which it could successfully bid, and the effect of increasing Belmond's costs or reducing its operating margins because the bargaining power of property owners seeking to sell or to enter into management agreements is increased.
 
The hospitality industry is heavily regulated, including with respect to food and beverage sales, employee relations, development and construction, and environmental matters, and compliance with these laws and regulations and with future changes to them could reduce profitability of properties that Belmond owns, leases or manages.
 
Belmond’s various properties are subject to numerous laws and government regulations, including those relating to the preparation and sale of food and beverages, liquor service, and health and safety of premises. The properties are also subject to laws governing Belmond’s relationship with employees in such areas as minimum wage and maximum working hours, overtime, working conditions, health and safety, hiring and firing employees and work permits.
 
The success of renovating and expanding existing properties depends upon obtaining necessary construction permits, approvals or zoning variances from local authorities. Failure to obtain or delay in obtaining these permits could adversely affect Belmond’s strategy of increasing revenues and earnings through renovation and expansion of existing properties.
 
Belmond is also subject to laws and regulations relating to the environment and the handling of hazardous substances that may impose or create significant potential environmental liabilities, even in situations where the environmental problem or violation occurred at a property before Belmond acquired it or without Belmond’s knowledge. Environmental laws may also impose liability for improper handling or disposal of hazardous substances or improper management of certain hazardous material which might

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be present at Belmond properties, such as asbestos or lead-based paint. Belmond’s trains and cruises must comply with environmental regulation of air emissions, wastewater discharges and fueling. Existing environmental laws and regulations may be revised or new laws and regulations related to global climate change, air quality, hazardous substances, wastes, or other environmental and health concerns may be adopted or become applicable to Belmond.
 
Although Belmond does not currently anticipate that the costs of complying with environmental laws will materially adversely affect its businesses, Belmond cannot assure that it will not incur material costs or liabilities in the future, due to the discovery of new facts or conditions, the occurrence of new releases of hazardous materials, or a change in environmental laws.
 
Belmond could be adversely affected by violations of the U.S. Foreign Corrupt Practices Act, the U.K. Bribery Act and similar anti-corruption laws.

Belmond's business operations are subject to anti-corruption laws and regulations, including the U.S. Foreign Corrupt Practices Act (“FCPA”) and the U.K. Bribery Act ("UKBA"). The FCPA, UKBA and other anti-corruption laws in other jurisdictions generally prohibit companies and their intermediaries from making improper payments to government officials and others for the purpose of obtaining or retaining business. Belmond operates in many parts of the world that have experienced governmental corruption to some degree and, in certain circumstances, strict compliance with anti-corruption laws may conflict with local customs and practices. Belmond trains its employees in its Code of Conduct and Anti-Corruption Policy and Procedures and also requires its third-party business partners and agents and others who work with Belmond or on its behalf to comply with Belmond's anti-corruption policies. Belmond also has procedures and controls in place to monitor internal and external compliance. Belmond cannot provide assurance, however, that its internal controls and procedures will adequately protect against reckless or criminal acts committed by employees or third parties with whom Belmond works. If Belmond found, or it was alleged, that Belmond's employees or third parties with whom it works had engaged in such acts, Belmond's business could be disrupted and Belmond could be subject to criminal or civil penalties which could have a material adverse effect on Belmond's results of operations, financial condition and cash flows.

Belmond’s acquisition, expansion and development strategy may be less successful than expected and, therefore, Belmond's growth may be limited.
 
Belmond intends to increase its revenues and earnings in the long term by acquiring new properties, managing additional properties under contract, and expanding existing properties. The ability to pursue new growth opportunities successfully will depend on management’s ability to:
 
identify properties suitable for acquisition, management and expansion,
 
negotiate purchases or construction on commercially reasonable terms or successfully negotiate management agreements of properties Belmond does not own or in which it has only a non-controlling interest,
 
obtain the necessary financing and government permits or approvals,

build on schedule and with minimum disruption to guests, and
 
integrate new properties into Belmond’s operations.
 
Also, the acquisition and/or management of properties in new locations may present operating and marketing challenges that are different from those experienced at Belmond’s existing locations. Belmond can provide no assurance that management will succeed in this growth strategy.
 
Successful new project development and major expansions depend on timely completion within budget and on satisfactory market conditions. Risks that could affect a project include:

construction delays or cost overruns that may increase project costs,

delay or denial of zoning, occupancy and other required government permits and authorizations,

write-off of development costs incurred for projects that are not pursued to completion,

natural disasters such as earthquakes, hurricanes, floods or fires,


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defects in design or construction that may result in additional costs to remedy, or that require all or a portion of a property to be closed during the period needed to rectify the situation,

inability to raise capital to fund a project because of poor economic or financial conditions,

claims and disputes between Belmond and other contracting parties resulting in delay, monetary loss or project termination,

governmental restrictions on the nature or size of a project or timing of completion,

changes in market conditions such as oversupply that may affect a project's profitability, and

discovery or identification of environmental conditions that could require unanticipated studies, cleanups, approvals, increased costs, time delays or even project termination.

Occurrence of any of these events could adversely affect the profitability of planned expansions and new developments.
 
Belmond may be unable to obtain the necessary additional capital to finance the growth of its business.
 
The acquisition, expansion and development of leisure properties, as well as the ongoing renovations, refurbishments and improvements required to maintain or upgrade newly acquired, expanded or existing properties, are capital intensive. The availability of internally generated cash flow, future borrowings and access to equity capital markets to fund these acquisitions, expansions and projects depend on prevailing market conditions and the acceptability of available financing terms. Belmond can give no assurance that future borrowings or capital raising will be available to Belmond, or available on acceptable terms, in an amount sufficient to fund its needs. Failure to make investments necessary to maintain or improve Belmond's properties could adversely affect the performance of Belmond's properties.
 
Future equity financings may be dilutive to the existing holders of common shares. Future debt financings may require restrictive covenants that would limit Belmond’s flexibility in operating its business. See also “Risks Relating to Belmond’s Financial Condition and Results of Operations” and "Risks of Investing in Class A Common Shares" below.
 
Belmond’s operations may be adversely affected by extreme weather conditions and the impact of natural disasters, and insurance may not fully cover these and other risks.
 
Belmond operates properties in many locations, each of which is subject to local weather patterns affecting the properties and customer travel. As Belmond’s revenues and operating performance are dependent on the revenues and performance of individual properties, extreme weather or other environmental conditions from time to time can have a major adverse impact upon individual properties or particular regions, resulting in temporary loss of revenue or even closure while repairs are made. Furthermore, depending on the location and configuration of certain Belmond properties, such as along coasts, lagoons or rivers, they may be subject to possible adverse consequences of global climate change, including water levels or increased extreme weather patterns.
 
Belmond carries property, liability, hotel business interruption and other kinds of insurance in amounts management deems reasonably adequate, but claims may exceed the insurance limits or be outside the scope of coverage. Also, insurance against some risks may not be available to Belmond on commercially reasonable terms, or available at all, requiring Belmond to self-insure against possible loss.
 
If the relationships between Belmond and its employees were to deteriorate, Belmond may be faced with labor shortages or stoppages, which would adversely affect the ability to operate its properties and could cause reputational harm to Belmond.
 
Belmond’s relations with its employees in various countries could deteriorate due to disputes related to, among other things, wage or benefit levels, working conditions or management’s response to changes in government regulation of workers and the workplace.  Operations rely heavily on employees to provide a high level of personal service, and any labor shortage or stoppage caused by poor relations with employees, including unionized labor, could adversely affect the ability to provide those services, which could reduce occupancy and revenue and tarnish Belmond’s reputation.
 

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Belmond’s owned hotels are subject to risks generally incidental to the ownership and operation of commercial real estate and often beyond Belmond's control.
 
These include:
 
fluctuating values of commercial real estate and potential asset value impairments due to operating performance falling short of expectation or other triggering events,
 
changes in national, regional and local economic and political conditions,
 
changes in interest rates and the availability, cost and terms of financing,
 
the impact of present or future government legislation and regulation (including environmental and eminent domain laws),
 
the ongoing need for capital improvements to maintain or upgrade properties,
 
potential discovery of environmental conditions associated with prior or present operations on site or nearby, and proper management and disposal of wastes and hazardous substances,
 
changes in property taxes and operating expenses,
 
the potential for uninsured or underinsured losses, and
 
limited ability to reduce the relatively high fixed costs of operating owned commercial real estate if revenue declines.
 
Belmond has undertaken a program to sell owned properties that are non-core to its business. In an unfavorable commercial real estate market, Belmond may be unable to sell properties at values it is seeking, particularly during an economic downturn and weakness in credit markets, or sell them at the pace Belmond had planned.

Loss, dilution or infringement of Belmond’s existing brand names or the failure to develop successful new brand names could adversely affect Belmond's business.
 
In the competitive hotel and leisure industry in which Belmond operates, trademarks and brand names are important in the marketing, promotion and revenue generation of Belmond’s properties. Belmond has a large number of trademarks and brand names, including its new "Belmond" portfolio brand, and expends resources each year on their surveillance, registration and protection. Belmond may also introduce new brand names in the future. Belmond’s future growth is dependent in part on increasing and developing its brand identities and customers' acceptance of those brands. From time to time, Belmond incurs costs in seeking to protect its intellectual property and in doing so, runs the risk that a court may not uphold its rights. The loss, dilution or infringement of any of Belmond’s brand identities, including any material losses or infringements of its current rights to the "Cipriani" brand, could have an adverse effect on its business, results of operations and financial condition.

Belmond operates the Venice Simplon-Orient Express train under a license of that trademark from SNCF. Termination of that license could have an adverse impact on Belmond's business.
 
Failures in Belmond’s information technology systems or in protecting the integrity of customer, employee and business data could reduce revenue and earnings and result in loss or in reputational harm.
 
Belmond's business involves the processing, use, storage and transmission of personal information regarding customers, employees and business partners for various business purposes, including marketing and promotions. Belmond is subject to numerous laws and regulations designed to protect personal financial and other information relating to customers, employees and the business, and has established policies and procedures to help protect the privacy and security of this information. These laws and regulations are complex and evolving and may, on occasion, be inconsistent from one jurisdiction to another. Compliance may increase Belmond's operating costs or limit Belmond's ability to market its properties and services. The EU General Data Privacy Regulation is likely to become law in early 2018 (after a two-year implementation period), increasing certain obligations on, and limiting certain uses by, businesses of the personal data of their customers, employees and business partners. The penalties for violation of this new law have increased significantly, with a maximum fine of 4% of group revenue or €20 million, whichever is higher, for the most serious breaches.


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Belmond depends on its own and third party information technology networks and systems to process, transmit and store company and personal information, and to communicate among its various locations around the world, including reservation systems, property management systems, customer and employee databases, administrative systems, and third-party vendor systems. While Belmond relies on the security of these networks and systems to protect the personal information of the company, customers, employees and business partners, they may be vulnerable to threats such as system, network or Internet failures, security breaches, computer hacking or business disruption, viruses or malicious software programs, employee error, negligence, fraud or misuse, or other unauthorized attempts to access, modify or delete Belmond's company and personal information. Although Belmond has taken steps to address these concerns by implementing network security and internal controls, there can be no assurance that a system failure, unauthorized access, or other compromise will not occur. While from time to time attempts are made to access the Company's network, we are not aware of any instance in which these attempts have resulted in any material release of information, degradation or disruption to the Company's network and information systems.

Any compromise of Belmond's networks or systems, public disclosure or loss of company or personal information, non-compliance with legal or contractual obligations regarding personal information, or a violation of a privacy or security policy pertaining to personal information could result in disruption to Belmond's operations; loss of revenue or property; damage to Belmond's reputation and loss of confidence of customers, employees and business partners; legal claims or proceedings, liability under laws that protect personal information, regulatory penalties, monetary damages, regulatory enforcement actions, fines, and/or criminal or civil prosecution in one or more jurisdictions; and could result in subjecting Belmond to additional regulatory scrutiny, or additional costs and liabilities which could have a material adverse effect Belmond's business, operations or financial condition.

Some Belmond properties are geographically concentrated in countries where national economic downturns, political events or other changing conditions beyond Belmond’s control could disproportionately affect Belmond’s business.
 
While Belmond’s geographic diversification in 22 countries lessens the dependence of its results of operations on any particular region, Belmond owns seven hotels in Italy and one hotel in Peru and its 50%/50% joint ventures in Peru operate a further four hotels as well as PeruRail. Due to this concentration of properties in these two countries, Belmond’s performance and profitability are more exposed to national events or conditions in Italy and Peru than other countries where Belmond operates, such as:
 
changing local economic and competitive conditions,
 
weakening local currencies compared to the U.S. dollar,

natural and other disasters,
 
new government laws and regulations, and
 
changes in government administrations.
 
Belmond may be unable to manage effectively the risks associated with its joint venture investments, which may adversely impact the operations and profitability of those joint ventures.
 
Four of Belmond’s hotels and two of its train operations are owned by joint venture companies in which Belmond has an investment of 50% or less and shares control of at least some significant aspects of their businesses, such as expenditure for capital improvements. These joint venture investments of Belmond involve risks different from 100% ownership because Belmond’s partners:
 
may be unable to meet their financial obligations to the joint venture,
 
may have business interests inconsistent with those of Belmond or act contrary to Belmond’s objectives and policies,
 
may cause properties to incur unplanned liabilities or commitments, or
 
may take actions binding on the joint venture without Belmond’s consent or that otherwise impair Belmond’s operation of the business.
 
If any of these events occurs, the joint ventures may be subjected to additional risk, and Belmond’s operations could be adversely affected because it may have limited ability to rectify resulting problems within the joint venture and even to dispose of its joint venture investment. Also, disputes with joint venture partners may result in litigation costly to Belmond.


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Risks Relating to Belmond’s Financial Condition and Results of Operations
 
Economic downturns and disruption in the financial markets could adversely affect Belmond’s financial condition and results of operations.
 
Financial markets in the United States, Europe and Asia experienced significant disruption in 2008 and 2009, including volatility in securities prices and diminished liquidity and credit availability. Furthermore, the economic slowdown during this period in the United States and other countries weakened consumer confidence and led to significant reductions in the amounts persons and businesses spent on travel, hotels, dining and entertainment. Largely as a result, Belmond experienced pressure on pricing, reduced occupancy at its properties, and fewer customers from traditional markets for Belmond’s hotels and other travel products.  Belmond’s consolidated revenue and earnings from continuing operations declined. Although revenue has since increased, Belmond incurred losses or reduced earnings in 2010 and later years due mainly to higher costs and impairment charges.
 
While the global economy has improved since the 2008-2009 recession, if the recovery slows or adverse economic conditions recur, Belmond’s future revenue, profitability and cash flow from operations could decrease and its liquidity and financial condition, including Belmond’s ability to comply with financial covenants in its loan facilities, could be adversely impacted and its future growth plans curtailed.
 
Belmond has nine hotels, the Venice Simplon-Orient-Express train and the Belmond Afloat in France cruise business in Continental Europe. If uncertainty regarding euro-zone debt recurs and measures taken by European governments contribute to weakness of national economies, financial markets could experience disruption and consumer confidence could decline, resulting in less demand for these properties and negatively impacting Belmond's results of operations and financial condition.

Belmond has several operations in the U.K. In May 2015, the U.K.'s Prime Minister, David Cameron, was re-elected against a pledge that he would renegotiate Britain's membership in the European Union and hold an "in-out" referendum on the U.K.'s membership in the EU. This referendum is to be held on June 23, 2016. If the U.K. votes to leave the EU, financial markets could experience disruption and consumer confidence could decline, resulting in less demand for these U.K. properties and less demand from U.K. outbound guests and negatively impacting Belmond's results of operations and financial condition.
 
Financial uncertainty and economic weakness identified in the previous risk factor could adversely impact Belmond’s liquidity and financial condition, in particular Belmond’s ability to refinance debt or raise additional funds for its cash requirements for working capital, commitments and debt service.
 
During the year ending December 31, 2016, Belmond will have $5,349,000 of scheduled debt repayments including capital lease payments and debt held by consolidated variable interest entities. In 2017, Belmond will have $5,337,000 of scheduled debt repayments including capital lease payments and debt held by consolidated variable interest entities. Additionally, Belmond’s capital commitments at December 31, 2015 amounted to $8,662,000.
 
Belmond expects to fund its working capital requirements, debt service and capital expenditure commitments for the foreseeable future from operating cash flow, available committed borrowing facilities, issuing new debt or equity securities, rescheduling loan repayments or capital commitments, and disposing of non-core assets. See “Liquidity and Capital Resources” in Item 7—Management’s Discussion and Analysis of Financial Condition and Results of Operations. Belmond can give no assurance, however, that additional sources of financing for its unfunded commitments will be available on commercially acceptable terms, or available at all, or that Belmond will be able to refinance maturing debt or to reschedule loan repayments or capital commitments, or that other cash-saving steps management may take to enhance Belmond’s liquidity and capital position will bridge any shortfall. If additional sources of financing are unavailable, including because of possible future breach of loan financial covenants, Belmond may be unable to fund its cash requirements for working capital, commitments and debt service.
 

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Covenants in Belmond’s financing agreements could be breached or could limit management’s discretion in operating Belmond’s businesses, causing Belmond to make less advantageous business decisions.
 
Belmond recognizes the risk that a property-specific or group consolidated loan covenant could be breached. Belmond regularly prepares cash flow projections which are used to forecast covenant compliance under all loan facilities. If there is a likelihood of potential non-compliance with a covenant, Belmond takes proactive steps to meet with the lenders to seek an amendment to, or a waiver of, the financial covenant at risk. Obtaining an amendment or waiver may result in an increase in bank fees or borrowing costs, or may not be obtainable at all. If a covenant breach occurred in a material loan facility and Belmond was unable to agree with its lenders how the particular financial covenant should be amended or how the breach could be cured or waived, Belmond’s liquidity would be materially adversely affected. The revolving credit facility which is part of the $657,000,000 credit facility described above contains covenants regarding the Company's net leverage ratio and interest coverage ratio. The term loan portion of that facility is subject to cross-acceleration with the revolving facility. Therefore, if the Company were to breach either of these covenants, the entire facility could be accelerated and the lenders could foreclose on substantially all of the assets owned by the Company. In addition, the negative covenants in the credit facility place restrictions on the Company's ability to incur additional debt, to effect mergers and assets sales, and to pay dividends or repurchase shares. These covenants may limit the options available should management determine that the Company has insufficient liquidity.
 
In order to assure that Belmond has sufficient liquidity in the future, Belmond’s cash flow projections and available funds are discussed with the Company’s board of directors and Belmond’s advisors to consider the most appropriate way to develop Belmond’s capital structure and generate additional sources of liquidity. The options available to Belmond will depend on the current economic and financial environment and Belmond’s continued compliance with financial covenants. Options currently available to Belmond include increasing the leverage on certain under-leveraged assets, issuing equity or debt instruments and disposing of non-core assets.
 
Belmond can give no assurance that its lenders would agree to modify or waive any affected covenant, which could impact Belmond’s ability to fund its cash requirements for working capital, commitments and debt service and could cause an event of default under any affected loan facility.
 
Belmond’s substantial indebtedness could adversely affect its financial condition.
 
Belmond has a large amount of debt in its capital structure and may incur additional debt from time to time. As of December 31, 2015, Belmond’s consolidated long-term indebtedness was $596,487,000 (including the current portion and the long-term indebtedness of Belmond’s consolidated variable interest entities of $97,328,000). This substantial indebtedness could:
 
require Belmond to dedicate much of its cash flow from operations to debt service payments, and so reduce the availability of cash flow to fund working capital, capital expenditures, product and service development and other general corporate purposes,
 
limit Belmond’s ability to obtain additional financing for its business or to repay or refinance its existing indebtedness on satisfactory terms,
 
increase Belmond’s vulnerability to adverse economic and industry conditions, including the seasonality of some of Belmond’s activities, or
 
limit Belmond’s flexibility in planning for, or reacting to, changes in its business and industry as well as the economy generally.
 
Belmond’s failure to repay indebtedness when due may result in a default under that indebtedness and cause cross-defaults under other Belmond indebtedness. See the risk factor immediately above.
 
Increases in interest rates may increase Belmond’s interest payment obligations under its existing floating rate debt, and refinanced debt may have higher interest rates than the debt refinanced.
 
After taking into account Belmond’s fixed interest rate swaps, approximately 49% of Belmond’s consolidated long-term debt at December 31, 2015 bears interest that fluctuates with prevailing interest rates, so that any rate increases may increase Belmond’s interest payment obligations. From time to time, Belmond enters into hedging transactions in order to manage its floating interest rate exposure, but Belmond can give no assurance that those hedges will lessen the impact on Belmond of rising interest rates. Also, as Belmond refinances its long-term debt with new debt, the interest payable on the new debt may be at a higher rate than the debt refinanced.

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Fluctuations in foreign currency exchange rates may have a material adverse effect on Belmond’s financial condition and operating results.
 
Substantial portions of Belmond’s revenue and expenses are denominated in non-U.S. currencies such as European euros, British pounds sterling, Russian rubles, South African rand, Peruvian nuevos soles, Botswana pula, Brazilian reals, Mexican pesos and various Southeast Asian currencies. In addition, Belmond buys assets and incurs liabilities in these foreign currencies. Foreign exchange rate fluctuations may have a material adverse effect on Belmond’s financial statements. Belmond’s financial statements are presented in U.S. dollars and can be impacted by foreign exchange fluctuations through both:
 
translation risk, which is the risk that the financial statements for a particular period or as of a certain date depend on the prevailing exchange rates of the various currencies against the U.S. dollar,

transaction risk, which is the risk associated with changes in exchange rates between the time when a transaction is initially recorded and when it is ultimately settled, and
 
economic risk, which is the risk that the currency of costs and liabilities does not move in line with the currency of revenue and assets, which fluctuations may adversely affect Belmond’s operating margins.

Belmond is subject to accounting regulations and uses certain accounting estimates and judgments that may differ significantly from actual results.
 
Implementation of existing and future standards and rules of the U.S. Financial Accounting Standards Board (“FASB”) or other regulatory bodies could affect the presentation of Belmond’s financial statements and related disclosures. Future regulatory requirements could significantly change Belmond’s current accounting practices and disclosures. These changes in the presentation of Belmond’s financial statements and related disclosures could change an investor’s interpretation or perception of Belmond’s financial position and results of operations.
 
Belmond uses many methods, estimates and judgments in applying its accounting policies. By their nature, these are subject to substantial risks, uncertainties and assumptions, and factors may arise over time that lead Belmond to change its methods, estimates and judgments which could significantly affect the presentation of Belmond’s results of operations.
 
As an example of these estimates and judgments, Belmond evaluates goodwill at least annually, or when triggering events or changes in circumstances, such as adverse changes in the industry or economic trends or an underperformance relative to historical or projected future operating results, indicate the carrying value may not be recoverable. The Company recorded goodwill impairment charges at four owned properties in 2015 and continues to monitor remaining goodwill balances for future potential impairment (see Note 8 to the Financial Statements). Belmond’s impairment analysis incorporates various assumptions and uncertainties that management believes are reasonable and supportable considering all available evidence, such as the future cash flows of the business, future growth rates and the related discount rates. However, these assumptions and uncertainties are, by their very nature, highly judgmental. Belmond cannot guarantee that its business will achieve the forecasted results which have been included in its impairment analysis. If Belmond is unable to meet these assumptions in future reporting periods, it may be required to record a charge for goodwill impairment losses.
 
Risks of Investing in Class A Common Shares

The price of the class A common shares may fluctuate significantly, which may make it difficult for shareholders to sell the class A common shares when they want or at desired prices.
 
The price of the class A shares trading on the NYSE constantly fluctuates, and Belmond management expects that the market price of the class A shares will continue to do so. Holders of class A shares will be subject to the risk of volatility and depressed prices.
 
The price of class A shares can fluctuate as a result of a variety of factors, many of which are beyond Belmond’s control. These factors include:
 
quarterly variations in operating results,
 
operating results that vary from the expectations of management, securities analysts and investors,
 

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changes in expectations as to future financial performance, including financial estimates by securities analysts and investors,
 
developments generally affecting Belmond’s business or the hospitality industry,
 
market speculation about a potential acquisition of Belmond or all or part of its business,
 
announcements by Belmond or its competitors of significant contracts, acquisitions, joint ventures or capital commitments,
 
announcements of significant claims or proceedings against Belmond,
 
future sales of equity or equity-linked securities including by holders of large positions in the outstanding class A shares, and
 
general domestic and international economic conditions.
 
In addition, the stock market in general can experience volatility that is often unrelated to the operating performance of a particular company. This volatility can arise, for example, because of disruption in capital markets and contraction of credit availability, and can be significant. These broad market fluctuations may adversely affect the market price of the class A shares.

The Company is not restricted from issuing additional class A or class B common shares, and any sales could negatively affect the trading price and book value of the class A common shares outstanding.
 
The Company may in its discretion sell newly issued class A or B common shares from time to time in the future, subject to compliance with certain procedural requirements of the NYSE relating to the class A common shares. There can be no assurance that the Company will not make significant sales of class A or B common shares in public offerings or private placements to raise capital, for funding future acquisitions, in employee equity compensation programs or for other corporate purposes. Any sales could materially and adversely affect the trading price of the class A shares outstanding or could result in dilution of the ownership interests of existing shareholders.

A subsidiary of the Company, which has two Company directors on its board of directors, may control the outcome of most matters submitted to a vote of the Company’s shareholders.
 
A wholly-owned subsidiary of the Company, Belmond Holdings 1 Ltd. (“Holdings”), currently holds all 18,044,478 outstanding class B common shares in the Company representing about 64% of the combined voting power of outstanding class A and B common shares for most matters submitted to a vote of shareholders, and the directors and officers of the Company hold class A shares representing an additional approximate 1% of the combined voting power. In general, holders of class A common shares and holders of class B common shares vote together as a single class, with holders of class A shares having one-tenth of one vote per share and holders of class B shares having one vote per share. Therefore, as long as the number of outstanding class B shares exceeds one-tenth the number of outstanding class A shares, Holdings could control the outcome of most matters submitted to a vote of the shareholders.
 
Under Bermuda law, common shares of the Company owned by Holdings are outstanding and may be voted by Holdings. The manner in which Holdings votes its shares is determined by the four directors of Holdings, two of whom, John D. Campbell and Mitchell C. Hochberg, are also directors of the Company, consistently with the exercise by those directors of their fiduciary duties to Holdings. Those directors, should they choose to act together, will be able to control substantially all matters affecting the Company, and to block a number of matters relating to any potential change of control of the Company. See Item 12—Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters.
 
Certain institutional shareholders representing two hedge fund groups challenged the Company’s corporate governance structure as it relates to the ownership and voting of class B common shares, including by proposing shareholder resolutions to amend the Company’s bye-laws to treat the class B shares as “treasury shares” with no voting rights and to cancel the class B shares. Those resolutions were rejected at a special general meeting of shareholders of the Company in October 2008 by a majority of the votes of the outstanding class A and class B common shares, voting together as a single class. Following the defeat of the resolutions at the special general meeting, these shareholders filed a petition in the Supreme Court of Bermuda in January 2009 against the Company, Holdings and certain of the Company’s directors seeking similar and related relief, including a declaration that the Company holding or voting class B shares, directly or indirectly, was unlawful and an order restraining Holdings from exercising its voting rights attached to the class B shares. After a trial on preliminary issues relating to the legality of the holding of class B shares in the Company by Holdings, the Court ruled in June 2010 that it is lawful for Holdings to hold and exercise voting rights

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in respect of class B shares in the Company held by Holdings and struck out the petition in its entirety. The Court also awarded the respondents their defense costs incurred in the proceedings. The foregoing description of the Court’s judgment does not purport to be complete and is qualified in its entirety by reference to the judgment, which the Company filed as Exhibit 99.1 to its Current Report on Form 8-K dated June 1, 2010 and is incorporated herein by reference.
 
The corporate governance structure of the Company, with dual class A and B common shares and ownership and voting of the class B shares by Holdings, has been analyzed by legal counsel, and the Company’s board of directors and management believe that the structure is valid under Bermuda law. The judgment of the Bermuda Supreme Court in June 2010 confirms this belief.  The structure enables Belmond to oppose any proposal that Belmond believes is contrary to the best interests of the Company and its shareholders, including a coercive or unfair offer to acquire the Company, and thus preserve the value of Belmond for all shareholders. The structure has been in place since the Company’s initial public offering in 2000, and has been fully described in the Company’s public filings and clearly disclosed to investors considering buying the class A common shares.
 
However, new litigation against the Company involving its corporate governance structure or other future challenges may occur, the outcome of which may be uncertain. Furthermore, new litigation or future challenges may cause the Company to incur costs, such as legal expenses, to defend its corporate governance structure and these costs may be substantial in amount.
 
Provisions in the Company’s charter documents, and the preferred share purchase rights currently attached to the class A and class B common shares, may discourage a potential acquisition of Belmond, even one that the holders of a majority of the class A common shares might favor.
 
The Company’s memorandum of association and bye-laws contain provisions that could make it more difficult for a third party to acquire Belmond or to engage in another form of transaction involving a change of control of the Company without the consent of the Company’s board of directors. These provisions include:

a supermajority shareholder voting provision for the removal of directors from office with or without cause,
 
a supermajority shareholder voting provision for “business combination” transactions with beneficial owners of shares carrying 15% or more of the votes which may be cast at any general meeting of shareholders, and
 
limitations on the voting rights of such 15% beneficial owners.
 
Also, the Company’s board of directors has the right under Bermuda law to issue preferred shares without shareholder approval, which could be done to dilute the share ownership of a potential hostile acquirer. Although management believes these provisions provide the shareholders an opportunity to receive a higher price by requiring potential acquirers to negotiate with the Company’s board of directors, these provisions apply even if the offer is favored by shareholders holding a majority of the Company’s equity.
 
The Company has in place a shareholder rights agreement providing for rights to purchase series A junior participating preferred shares of the Company. The rights are not currently exercisable, and they are attached to and transferable with the class A and B common shares on a one-to-one basis. These rights may have anti-takeover effects on a potential acquirer holding 15% or more of the outstanding class A or B common shares.
 
These anti-takeover provisions are in addition to the ability of Holdings and directors and officers of the Company to vote shares representing a significant majority of the total voting power of the Company’s common shares. See the risk factor immediately above and Item 12—Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters—Voting Control of the Company; Changes in Control.
 
A judgment of a United States court for liabilities under the U.S. securities laws might not be enforceable in Bermuda, or an original action might not be brought in Bermuda against the Company for liabilities under U.S. securities laws.
 
The Company is incorporated in Bermuda, a majority of its directors or executive officers are not U.S. citizens or residents, and most of its assets and the assets of its directors and officers are located outside the United States. As a result, it may be difficult for shareholders to:
 
effect service of process within the United States upon the Company or its directors and officers, or
 
enforce judgments obtained in United States courts against the Company or its directors and officers based upon the civil liability provisions of the United States federal securities laws.
 

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Belmond has been advised by its Bermuda legal counsel that there is doubt as to:
 
whether a judgment of a United States court based solely upon the civil liability provisions of the United States federal securities laws would be enforceable in Bermuda against the Company or its directors and officers, and
 
whether an original action could be brought in Bermuda against the Company or its directors and officers to enforce liabilities based solely upon the United States federal securities laws.

ITEM 1B.       Unresolved Staff Comments

None.

ITEM 2.       Properties

As described in Item 1—Business, Belmond owns, partially-owns and/or operates 44 properties, consisting of 34 highly individual deluxe hotels, 29 of which are owned (including nine under long-term lease), four European tourist trains, two cruise ships in Myanmar (one of which is under long-term charter), one French canal cruise business consisting of five small canal boats, and one stand-alone restaurant in the United States. Belmond also owns interests of 50% or less in four hotels in Peru (including three under long-term lease), its Southeast Asian train and PeruRail. It also operates under management contract but has no ownership interest in one hotel in the United States. The corporate office and regional sales, marketing and operating offices of the hotels, trains and cruise businesses are occupied under operating leases. The Company has two properties scheduled for future openings, the Belmond Cadogan Hotel in London, England and the Belmond Grand Hibernian train to be based in Dublin, Ireland.

ITEM 3.       Legal Proceedings

Except as described below, there are no material legal proceedings, other than ordinary routine litigation incidental to Belmond’s business, to which the Company or any of its subsidiaries is a party or to which any of their property is subject.

Belmond Copacabana Palace

As previously reported, in February 2013, the State of Rio de Janeiro Court of Justice affirmed a 2011 decision of a Rio state trial court against Sea Containers Ltd (“SCL”) in lawsuits brought against SCL by minority shareholders in Companhia Hoteis Palace (“CHP”), the company that owns the Copacabana Palace, relating to the recapitalization of CHP in 1995, but reduced the total award against SCL to approximately $27,000,000. SCL further appealed the judgments during the second quarter of 2013 to the Superior Court of Justice in Brasilia. SCL sold its shares in CHP to the Company in 2000. Years later, in 2006, SCL entered insolvency proceedings in the U.S. and Bermuda that are continuing in Bermuda. Possible claims could be asserted against the Company or CHP in connection with this Brazilian litigation, although no claims have been asserted to date. 

As a precautionary measure to defend the hotel, CHP commenced a declaratory lawsuit in the Rio state court in December 2013 seeking judicial declarations that no fraud was committed against the SCL plaintiffs when the shares in CHP were sold to the Company in 2000 and that the sale of the shares did not render SCL insolvent. Pending rulings on those declarations, the court granted CHP an injunction preventing the SCL plaintiffs from provisionally enforcing their 2011 judgments against CHP, which judgment was subsequently reversed on appeal in May 2014. CHP sought reconsideration from the appellate court of this decision, but the court dismissed its request, resulting in the return of the declaratory lawsuit proceedings to the Rio State Court.

Management cannot estimate the range of possible loss if the SCL plaintiffs assert claims against the Company or CHP, and Belmond has made no reserves in respect of this matter. If any such claims were brought, Belmond would continue to defend its interests vigorously. See Note 19 to the Financial Statements (Item 8).

Ubud Hanging Gardens

In November 2013, the third-party owner of Ubud Hanging Gardens in Bali, Indonesia dispossessed Belmond from the hotel under long-term lease without prior notice. As a result, Belmond was unable to continue operating the hotel and, accordingly, to prevent any confusion to its guests, Belmond ceased referring to the property in its sales and marketing materials, including all electronic marketing.

Belmond believed that the owner's actions were unlawful and in breach of the lease arrangement and constituted a wrongful dispossession. Belmond pursued its legal remedies through arbitration proceedings required under the lease. In June 2015, a Singapore arbitration panel issued its final award in favor of Belmond, holding that the owner had breached Indonesian law and

27


the lease and granting monetary damages and costs to the Company in an amount equal to approximately $8,500,000. Since its receipt of the arbitral award, Belmond has been engaged in the process of enforcing this arbitral award in the Indonesian courts. Starting in April 2014, the Indonesian trial courts have dismissed six separate actions filed by the owner for lack of jurisdiction due to the arbitration clause in the parties’ lease. The owner has appealed these decisions, one of which was reversed by the Appellate Court in October 2014. Belmond has appealed this case to the Indonesian Supreme Court. As supplemental proceedings to its arbitration claim, Belmond commenced contempt proceedings in the High Court in London, England, where the owner resided, for pursuing the Indonesian proceedings contrary to an earlier High Court injunction, and obtained against the owner in July 2014 a contempt order, which subsequently resulted in the court issuing a committal order of imprisonment for 120 days. The owner left England before the court order was issued and has not yet served the sentence.

Belmond does not believe there is any merit in the owner’s outstanding Indonesian actions and is vigorously defending its rights while it seeks to enforce the Singapore arbitral award. While the Company can give no assurances, it believes that it should ultimately be able to enforce its arbitral award. Given the uncertainty involved in this litigation, Belmond recorded in the year ended December 31, 2013, a non-cash impairment charge in the amount of $7,031,000 relating to long-lived assets and goodwill of Ubud Hanging Gardens and has not booked a receivable in respect of the award. Belmond also reclassified Ubud Hanging Gardens as a discontinued operation. See Notes 4, 7, 8, 9 and 19 to the Financial Statements.

Belmond Hotel das Cataratas

In September 2014, the Secretary of the Brazilian Ministry of Planning, Budget and Management notified the Company that the Ministry was denying its application to amend the lease for Belmond Hotel das Cataratas, which was entered into in 2007, among other things, to extend the term and reduce the rent. Belmond had applied for the amendment in 2009 based on its claim that it suffered additional unanticipated and/or unforeseeable costs in performing the refurbishment of the hotel as required by the lease and related tender documentation in order to raise the standard of the property to a five star luxury standard.

The Company has appealed to the Secretary to re-consider its decision on both procedural and substantive grounds. If the Secretary does not alter its decision, the Company can appeal directly to the Minister for Planning and ultimately to the Brazilian courts. Belmond’s current annual lease expense for the hotel is R$16,715,000 (equivalent to $4,281,000 at December 31, 2015). However, until August 2014, the Company had been paying, with the approval of the Ministry, the amount of R$11,065,000 ($2,834,000) per annum without the yearly adjustment for inflation as provided for in the lease, pending resolution of the case. The Company has expensed the full rental amount. Consequently, the difference between the cumulative rental charge and the amount paid of R$18,666,000 ($4,780,000) has been fully accrued. Based on the Secretary’s decision, the Ministry will be assessing rent at the contractual rate, which has been included in the table of future rental payments as at December 31, 2015 (see Note 19 to the Financial Statements). Beyond the amounts accrued, management estimates that the range of possible additional loss to Belmond could be between R$1,500,000 and R$2,500,000 (equivalent to $384,000 and $640,000 at December 31, 2015) plus interest from the date of the September 2014 decision until a final non-appealable decision is rendered. On March 20, 2015, the Ministry provided notice to the hotel that an aggregate amount of approximately R$17,000,000 ($4,354,000) was due on March 31, 2015 as a result of the denial of the application. The Company intends to continue to press for a reconsideration by the Ministry of its request, which the Ministry has yet to address through its administrative process, and has not paid to the Ministry the amount claimed due. In the meantime, the Company is considering proceedings against the Ministry in the Brazilian courts.

Belmond Sanctuary Lodge

In January 2015, Peru Belmond Hotels S.A. received notification of a claim filed by the Public Prosecutor's office of the Regional Government of Cusco, seeking annulment of a contract and public deed of amendment extending the term of the Belmond Sanctuary Lodge concession for ten years from May 2015 to May 2025. The claim alleged that the amendment was invalid principally because the President of the Region, who executed the public deed on December 27, 2013, did not have proper authority to execute the amendment because a resolution dismissing him from office had been issued the day before. The court of first instance dismissed the case in May 2015 on technical grounds and the claimant appealed to the Superior Court of Cusco. At a hearing before the Superior Court of Cusco in September 2015, the Superior Court overturned the decision of the court of first instance and declared that the entire proceeding be vacated based on technical grounds. The court of first instance considered the matter and again dismissed the Public Prosecutor's claim in January 2016 on technical grounds. The Public Prosecutor's office may again appeal this decision, but as both a procedural and substantive matter, Belmond believes it has meritorious defenses and intends to contest the matter vigorously.

Cupecoy Village Development N.V.

In July 2015, Cupecoy Village Development N.V. received notification from the tax authorities in Sint Maarten of an intention to issue tax assessments for periods 2007-2010 in respect of wages taxes, social security, turnover tax and penalties. Belmond believes

28


that the report received from the tax authorities contains a number of material miscalculations and misinterpretations of fact and law. The Company does not expect the resolution of this claim to result in a payment of more than $1,000,000, which is the amount that has been accrued at December 31, 2015. Beyond the amount accrued, management estimates the range of possible additional loss to Belmond to be between $Nil and $15,500,000.

"Cipriani" Trademark

In May 2010, after prevailing in litigation at the trial and appellate court levels, Belmond settled litigation in the United Kingdom for infringement of its U.K. and Community (European wide) registrations for the “Cipriani” trademark. Defendants paid the amount of $3,947,000 to Belmond in March 2010 with the balance of $9,833,000 being payable in installments over five years with interest. Belmond received the final payment in the amount of $1,178,000 in June 2015.

Subsequent to Belmond’s success before the U.K. courts, there have arisen a number of European trade mark opposition and infringement cases relating to Belmond "Cipriani" and "Hotel Cipriani" Community trademarks. These include an ongoing invalidity action filed by Arrigo Cipriani in the European Trade Mark Office (“OHIM”) against Belmond’s "Cipriani" Community trademark. To date, Belmond has successfully rebutted this challenge at every level of administrative appeal, and this case is now before the General Court where Belmond also expects to prevail. Belmond has recently been successful in securing the cancellation in Portugal of a trademark application filed by an affiliated entity of the Cipriani family for “Cipriani”. Belmond has also been successful in obtaining cancellations of "Cipriani" trademark applications made by the Cipriani family's corporate entity in Russia.

There are a number of ongoing trade mark disputes with the Cipriani family in Italy: In January 2015, the Cipriani family and affiliated entities commenced proceedings against Belmond in the Court of Venice, asserting that a 1967 agreement pursuant to which the family sold their interest in the Hotel Cipriani constituted a coexistence agreement allowing both the Company to use “Hotel Cipriani” and the Cipriani family to use “Cipriani”.

In August 2015, pursuant to a separate claim filed by the Cipriani family, the Court of Venice ruled in favor of the Cipriani family, determining that their use of their full name (rather than just an initial with their surname), would not constitute infringement of the Company’s registered trademark. The Court’s ruling purports to apply to hotels and restaurants, as well as to all of the EU (other than the U.K.) rather than only Italy. The Company intends to appeal this decision. Separate proceedings brought by Belmond in Spain to defend Belmond's trademarks against a use by the Cipriani family and its affiliated entities of "Cipriani" to promote a restaurant, have been stayed pending the outcome of the Venice appeal.

While Belmond believes that it has meritorious cases in all of these proceedings, Belmond cannot estimate the range of possible additional loss to Belmond if it should not prevail in any or all of these cases and Belmond has made no accruals in these matters.

The Company and certain of its subsidiaries are parties to various legal proceedings arising in the normal course of business. These proceedings generally include matters relating to labor disputes, tax claims, personal injury cases, lease negotiations and ownership disputes. The outcome of each of these matters cannot be determined with certainty, and the liability that the relevant parties may ultimately incur with respect to any one of these matters in the event of a negative outcome may be in excess of amounts currently accrued for with respect to these matters. Where a reasonable estimate can be made, the additional losses or range of loss that may be incurred in excess of the amount recognized from the various legal proceedings arising in the normal course of business are disclosed separately for each claim, including a reference to where it is disclosed. However, for certain of the legal proceedings, management is unable to estimate the loss or range of loss that may result from these claims due to the highly complex nature or early stage of the legal proceedings.

ITEM 4.       Mine Safety Disclosures

None.


29


PART II

ITEM 5.       Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities

The class A common shares of the Company are traded on the New York Stock Exchange under the symbol Belmond.  All of the class B common shares of the Company are owned by a subsidiary of the Company and are not listed. See Item 12—Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters. The following table presents the quarterly high and low sales prices of a class A common share in 2015 and 2014 as reported for New York Stock Exchange composite transactions:
 
 
 
2015
 
2014
 
 
High
 
Low
 
High
 
Low
First quarter
 
$
12.55

 
$
10.51

 
$
15.92

 
$
13.15

Second quarter
 
13.26

 
12.01

 
14.67

 
11.72

Third quarter
 
12.66

 
9.85

 
15.00

 
11.63

Fourth quarter
 
10.94

 
8.51

 
12.56

 
10.45

 
The Company paid no cash dividends in 2015 and 2014 and has no present intention to pay dividends in the future.
 
The Islands of Bermuda where the Company is incorporated have no applicable government fiscal or monetary laws, decrees or regulations which restrict the export or import of capital or affect the payment of dividends or other distributions specifically to nonresident holders of the class A and B common shares of the Company or which subject United States holders to taxes. The Company's ability to pay dividends is limited by its credit agreement.
 
At February 19, 2016, there were 62 record holders of the class A common shares of the Company.
 
During 2015, the Company made no offering of securities including its class A common shares that was not registered in the United States.
 
Information responding to Item 201(e) of SEC Regulation S-K is omitted because the Company is a “foreign private issuer” as defined in SEC Rule 3b-4 under the 1934 Act.

Company Purchases of Equity Securities

The following table provides information about the Company’s purchases of equity securities for the three months ended December 31, 2015:
Issuer Purchases of Equity Securities
Period
 
Total number of shares purchased
 
Average price paid per share
 
Total number of shares purchased as part of publicly announced plans or programs (1)
 
Approximate dollar value of shares that may yet be purchased under the plans or programs
 
 
 
 
 
 
 
 
 
October 1, 2015 - October 31, 2015
 
214,077

 
10.56

 
214,077

 
45,000,012

November 1, 2015 - November 30, 2015
 
279,629

 
10.22

 
279,629

 
42,141,813

December 1, 2015 - December 31, 2015
 
547,513

 
9.40

 
547,513

 
36,992,806

 
 
 
 
 
 
 
 
 
Total
 
1,041,219

 
9.86

 
1,041,219

 
36,992,806

______________

(1)
On March 23, 2015, Belmond’s board of directors authorized up to $75 million of share repurchases.


30


ITEM 6.       Selected Financial Data

Belmond Ltd. and Subsidiaries
 
 
 
2015
 
2014
 
2013
 
2012
 
2011
 
 
$’000
 
$’000
 
$’000
 
$’000
 
$’000
 
 
 
 
 
 
 
 
 
 
 
Revenue
 
551,385

 
585,715

 
594,081

 
538,952

 
549,355

 
 
 
 
 
 
 
 
 
 
 
Impairments(1)
 
(9,796
)
 
(1,211
)
 
(36,430
)
 
(5,892
)
 
(20,060
)
 
 
 
 
 
 
 
 
 
 
 
Gain on disposal of property, plant and equipment, equity method investments and other assets(2)
 
20,275

 
4,128

 

 
1,514

 
16,544

 
 
 
 
 
 
 
 
 
 
 
Net earnings from unconsolidated companies, net of tax
 
9,075

 
9,484

 
6,442

 
2,124

 
4,357

 
 
 
 
 
 
 
 
 
 
 
Earnings/(losses) from continuing operations
 
17,388

 
2,047

 
(26,178
)
 
(11,426
)
 
(19,891
)
 
 
 
 
 
 
 
 
 
 
 
Net (losses)/earnings from discontinued operations, net of tax(3)
 
(1,534
)
 
(3,782
)
 
(5,318
)
 
4,538

 
(67,705
)
 
 
 
 
 
 
 
 
 
 
 
Net earnings/(losses)
 
15,854

 
(1,735
)
 
(31,496
)
 
(6,888
)
 
(87,596
)
 
 
 
 
 
 
 
 
 
 
 
Net losses/(earnings) attributable to non-controlling interests
 
411

 
(145
)
 
(63
)
 
(173
)
 
(184
)
 
 
 
 
 
 
 
 
 
 
 
Net earnings/(losses) attributable to Belmond Ltd.
 
16,265

 
(1,880
)
 
(31,559
)
 
(7,061
)
 
(87,780
)

 
 
2015
 
2014
 
2013
 
2012
 
2011
 
 
$
 
$
 
$
 
$
 
$
 
 
 
 
 
 
 
 
 
 
 
Basic earnings per share:
 
 

 
 

 
 
 
 

 
 

Earnings/(losses) from continuing operations
 
0.17

 
0.02

 
(0.25
)
 
(0.11
)
 
(0.19
)
Net (losses)/earnings from discontinued operations, net of tax
 
(0.01
)
 
(0.04
)
 
(0.05
)
 
0.04

 
(0.66
)
Basic net earnings/(losses) per share attributable to Belmond Ltd.
 
0.16

 
(0.02
)
 
(0.31
)
 
(0.07
)
 
(0.86
)
 
 
 
 
 
 
 
 
 
 
 
Diluted earnings per share:
 
 

 
 

 
 

 
 

 
 

Earnings/(losses) from continuing operations
 
0.17

 
0.02

 
(0.25
)
 
(0.11
)
 
(0.19
)
Net (losses)/earnings from discontinued operations, net of tax
 
(0.01
)
 
(0.04
)
 
(0.05
)
 
0.04

 
(0.66
)
Diluted net earnings/(losses) per share attributable to Belmond Ltd.
 
0.16

 
(0.02
)
 
(0.31
)
 
(0.07
)
 
(0.86
)
 
 
 
 
 
 
 
 
 
 
 
Dividends per share
 

 

 

 

 

 

31


 
 
2015
 
2014
 
2013
 
2012
 
2011
 
 
$’000
 
$’000
 
$’000
 
$’000
 
$’000
 
 
 
 
 
 
 
 
 
 
 
Total assets
 
1,509,475

 
1,655,223

 
1,879,866

 
1,892,027

 
1,930,869

 
 
 
 
 
 
 
 
 
 
 
Total long-term debt and obligations under capital leases(4)
 
596,487

 
620,235

 
639,731

 
619,505

 
634,417

 
 
 
 
 
 
 
 
 
 
 
Total shareholders’ equity
 
658,064

 
761,186

 
908,222

 
935,956

 
950,330

 
 
 
 
 

(1)
The impairment in 2015 consisted of impairment of goodwill of $4,098,000 at Belmond Grand Hotel Europe, $3,581,000 at Belmond Jimbaran Puri, $1,455,000 at Belmond La Résidence Phou Vao and $662,000 at Belmond Northern Belle.

The impairment in 2014 consisted of impairment of property, plant and equipment of $1,211,000 relating to the write-down to fair value of train carriages of Belmond's former Great South Pacific Express train, which are held in Australia and not in service.

The impairments in 2013 consisted of impairment of property, plant and equipment at Belmond La Samanna of $35,680,000 and impairment of property, plant and equipment at Belmond Grand Hotel Europe of $750,000.

The impairments in 2012 consisted of impairment of property, plant and equipment of $2,538,000 and impairment of other assets of $1,299,000 related to the write-down to fair value of train carriages of Belmond's former Great South Pacific Express train which were held in Australia and were not in service, and impairment of goodwill at Belmond Reid's Palace of $2,055,000.

The impairments in 2011 consisted of impairment of property, plant and equipment at Belmond Casa de Sierra Nevada of $8,153,000, and impairments of goodwill at Belmond Maroma Resort and Spa, Belmond Mount Nelson Hotel and Belmond La Residencia totaling $11,907,000.

(2)
The 2015 gain was related to the sale of Belmond's 50% ownership in Hotel Ritz by Belmond in May 2015 and the recognition of the deferred gain in relation to the sale of Inn at Perry Cabin by Belmond in March 2014.

The 2014 gain was related to the sale of the property and operations of Inn at Perry Cabin by Belmond in March 2014. Due to Belmond's continuing involvement in managing the hotel, its results are presented within continuing operations.

The 2012 gain was related to a capital lease at Belmond Grand Hotel Europe that was extinguished as part of a refinancing of its debt facilities.

The 2011 gain was related to the assignment of Belmond’s purchase and development agreements for its proposed New York hotel project in April 2011, along with the exercise of a call option by the assignee for excess development rights of the ‘21’ Club restaurant.

(3)
The results of Ubud Hanging Gardens, Porto Cupecoy, The Westcliff, The Observatory Hotel, Bora Bora Lagoon Resort, Keswick Hall and Hôtel de la Cité have been presented as discontinued operations for all periods presented.

Included in the earnings/(losses) from discontinued operations are real estate, goodwill, other intangible assets and property, plant and equipment impairment losses of $7,031,000 in 2013, $3,166,000 in 2012 and $65,144,000 in 2011; gain on sale of Porto Cupecoy of $439,000 in 2013, gain on sales of Keswick Hall, Bora Bora Lagoon Resort, The Observatory Hotel and The Westcliff in 2012 of $15,384,000 and gain on sale of Hôtel de la Cité in 2011 of $2,182,000.

(4)
Total long-term debt and obligations under capital lease excludes discount on secured term loan and debt issuance costs. See Note 10 to the Financial Statements.

See notes to consolidated financial statements (Item 8).

32


ITEM 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations

Introduction
 
On June 30, 2014, the Company changed its name from Orient-Express Hotels Ltd. to Belmond Ltd. following approval by shareholders at the 2014 annual general meeting held on that date. On July 28, 2014, the Company changed the ticker symbol of its class A common shares listed on the New York Stock Exchange from OEH to BEL.

Belmond currently owns, partially-owns and/or operates 44 properties (with two additional properties scheduled for future openings, the Belmond Cadogan Hotel in London, England and the Belmond Grand Hibernian train in Ireland).

Belmond has six reportable segments: owned hotels in (1) Europe, (2) North America (including one stand-alone restaurant) and (3) Rest of world; (4) Part-owned/ managed hotels; (5) Owned trains and cruises; and (6) Part-owned/ managed trains.

Hotels represent the largest part of Belmond’s business with the vast majority of the Company's revenues in 2015, 2014 and 2013, respectively, derived primarily from the Europe, North America and Rest of world segments.

Hotels in 2015 consisted of 29 deluxe hotels which were wholly or majority owned by Belmond or, in the case of Belmond Charleston Place, owned by a consolidated variable interest entity. Eleven of the owned hotels are located in Europe, five in North America and thirteen in the rest of the world. In addition, Belmond owns and operates the stand-alone restaurant ‘21’ Club in New York which is included within the North America owned hotels segment.

Belmond's part-owned/ managed segment consists of five hotels which Belmond operates under management contracts in Peru and the United States. Belmond has unconsolidated equity interests in four of the managed hotels.

In recent years, Belmond has sold to third parties a number of properties not considered key to Belmond’s portfolio of unique, high-valued properties as part of management's long-term strategy to reduce leverage and redeploy the capital in properties with higher potential returns.

In May 2015, Belmond completed the sale of Hotel Ritz by Belmond, Madrid, Spain. The gain on sale is reported within gain on disposal of property, plant and equipment and equity method investments in the statements of consolidated operations.
 
In March 2014, Belmond completed the sale of Inn at Perry Cabin by Belmond, St. Michaels, Maryland. Belmond has continued to manage the hotel for the new owner. Due to Belmond's continuing involvement in managing the hotel, its results, including the gain on sale, are presented within continuing operations.

During 2013, Belmond ceased to operate Ubud Hanging Gardens, Bali, Indonesia, following what Belmond believed was an unlawful dispossession of Belmond by the landlord for which Belmond has pursued its legal remedies under the lease. Accordingly, the results of Ubud Hanging Gardens have been reflected as discontinued operations for all periods presented. Belmond continues to pursue recovery of a 2013 arbitration award by a Singapore panel, but has not yet booked a receivable due to the continuing uncertainty surrounding the ultimate resolution of this and other proceedings relating to the landlord's breach of the Ubud Hanging Gardens lease. See Item 3—Legal Proceedings.

In March 2013, Belmond El Encanto, Santa Barbara, California, an owned hotel, reopened after a complete renovation spread over several years.

Belmond's owned trains and cruises segment consists of four European tourist trains, two river cruise ships in Myanmar and one French canal cruise business. Belmond's part-owned/ managed trains segment consists of two train businesses in Southeast Asia and Peru which Belmond operates under management contracts. Belmond has unconsolidated equity interests in both trains.

In July 2013, Belmond Orcaella, the second river cruise ship in Myanmar that the company operates under charter, was launched. The ship is chartered under a lease that expires in 2018, with a five-year renewal option.
 
Belmond's real estate development project at Porto Cupecoy on the Dutch side of St. Martin was sold in January 2013 and has been reflected as discontinued operations for all periods presented. Belmond formerly had small real estate projects in St. Martin, French West Indies, and Koh Samui, Thailand, but these are no longer held for sale and have been incorporated into the room stock of the adjoining hotels.
 

33


Hotel ADR, occupancy and RevPAR

Average daily rate, or ADR, is the average amount achieved for rooms sold. ADR is used by management to gauge the level of pricing achieved by a specific hotel or group of hotels in a given period.

Occupancy represents the total number of rooms sold divided by the total number of rooms available at a hotel or group of hotels. Occupancy measures the utilization of a hotel's available capacity. Management uses occupancy to gauge demand at a specific hotel or group of hotels in a given period.

RevPAR is revenue per available room, which for any hotel in a given period is the total rooms' revenue divided by the number of available rooms. Management uses RevPAR to identify trend information with respect to room revenues and to evaluate hotel performance. RevPAR is a commonly used performance measure in the industry. It is often used in comparison to competitors within a custom defined market or a competitive set.

Same store RevPAR is a comparison of RevPAR based on the operations of the same units in each period, by excluding the effect of any hotel acquisitions in the period or major refurbishments where a property is closed for a full quarter or longer. The comparison also excludes the effect of dispositions (including discontinued operations) or closures.

ADR and RevPAR are measures for a point in time (a day, month or year) and are most often compared across like time periods. Current ADR and RevPAR are not necessarily indicators of future performance.

In 2015, same store RevPAR decreased by 5% in U.S. dollars, but increased by 11% in constant currency. Average occupancy was 61% and ADR was $481. In 2014, same store RevPAR remained consistent in U.S. dollars, but increased by 4% when measured in local currency. Average occupancy was 59% and ADR was $523.

Business strategy

Belmond plans to grow the business in the long term by:
 
driving top- and bottom-line growth at the Company's existing businesses

stepping up the Company's efforts to continue to build brand awareness, and
 
positioning the Company for footprint expansion.
 
For additional information, see "Management Strategies" in Item 1—Business.
 
Revenue and expenses
 
Belmond derives revenue from owned hotel operations primarily from the sale of rooms and the provision of food and beverages.  The main factors for analyzing rooms revenue are the number of room nights sold, or occupancy, ADR, and RevPAR, referred to above which is a measure of both these factors.

The revenue from the owned trains and cruises segment primarily comprises tickets sold for travel and food and beverage sales.
 
Revenue from part-owned/ managed hotels and trains includes fees received under management contracts, which are typically based upon a combination of a percentage of the revenue from operations and operating earnings calculated before specified fixed charges.

Cost of services includes labor, repairs and maintenance, energy and the costs of food and beverages sold to customers in respect of owned hotels, trains and cruises.
 
Selling, general and administrative expenses include travel agents’ commissions, the salaries and related costs of the sales teams, advertising and public relations costs, and the salaries and related costs of management.
 
Depreciation and amortization includes depreciation of owned hotels, trains and cruises.
 

34


Impact of foreign currency exchange rate movements
 
As reported below in the comparisons of the 2015, 2014 and 2013 financial years under “Results of Operations”, Belmond has exposure arising from the impact of translating its global foreign currency earnings and expenses into U.S. dollars. Ten of Belmond’s owned hotels in 2015 operated in euro territories, two in Brazilian real, one in South African rand, one in British pounds sterling, three in Botswana pula, two in Mexican peso, one in Peruvian nuevo sol, one in Russian ruble and six in various Southeast Asian currencies. Revenue of the Venice Simplon-Orient-Express, Belmond British Pullman, Belmond Northern Belle and Belmond Royal Scotsman trains was primarily in British pounds sterling, but the operating costs of the Venice Simplon-Orient-Express were mainly denominated in euros. Revenue derived by Belmond Maroma Resort and Spa, Belmond La Samanna and Belmond Miraflores Park was recorded in U.S. dollars, but the majority of the hotels’ expenses were denominated in Mexican pesos, euros and Peruvian nuevo soles, respectively. Both revenue and the majority of expenses for Belmond Governor's Residence and Belmond La Résidence D'Angkor were recorded in U.S. dollars.

Except for the specific instances described above, Belmond’s properties match foreign currency earnings and costs to provide a natural hedge against currency movements. The reporting of Belmond’s revenue and costs translated into U.S. dollars, however, can be materially affected by foreign exchange rate fluctuations from period to period.
 
Constant currency

Belmond analyzes certain key financial measures on a constant currency basis as this helps identify underlying business trends, without distortion from the effects of currency movements. Measurement on a constant currency basis means the results exclude the effect of foreign currency translation and are calculated by translating prior year results at current year exchange rates.

Market capitalization
 
The Company’s class A common share price decreased during 2015 to $9.50 at December 31, 2015, from $12.37 at December 31, 2014 and Belmond’s market capitalization decreased to $0.96 billion at December 31, 2015, from $1.29 billion at December 31, 2014.


35


Results of Operations

Belmond’s operating results for the years 2015, 2014 and 2013, expressed as a percentage of revenue, are as follows:
 
 
2015
 
2014
 
2013
Year ended December 31,
 
%
 
%
 
%
 
 
 
 
 
 
 
Revenue:
 
 
 
 
 
 
Owned hotels:
 
 
 
 
 
 
Europe
 
36

 
36

 
37

North America
 
27

 
24

 
25

Rest of world
 
23

 
25

 
24

Total owned hotels
 
86

 
85

 
86

Part-owned/ managed hotels
 
1

 
1

 
1

Total hotels
 
87

 
86

 
87

Owned trains & cruises
 
12

 
13

 
12

Part-owned/ managed trains
 
1

 
1

 
1

Total trains & cruises
 
13

 
14

 
13

 
 
 
 
 
 
 
Total revenue
 
100

 
100

 
100

 
 
 
 
 
 
 
Cost of services
 
(44
)
 
(45
)
 
(45
)
Selling, general and administrative
 
(37
)
 
(37
)
 
(38
)
Depreciation and amortization
 
(9
)
 
(9
)
 
(8
)
Impairment of goodwill
 
(2
)
 

 

Impairment of property, plant and equipment
 

 

 
(6
)
Gain on disposal of property, plant and equipment and equity method investments
 
4

 
1

 

(Loss)/gain on extinguishment of debt
 

 
(2
)
 
1

Other income
 

 

 

Interest income, interest expense and foreign currency, net
 
(7
)
 
(6
)
 
(5
)
Earnings/(losses) before income taxes and earnings from unconsolidated companies, net of tax
 
5

 
2

 
(1
)
Provision for income taxes
 
(3
)
 
(3
)
 
(3
)
Earnings from unconsolidated companies, net of tax
 
2

 
2

 
1

Earnings/(losses) from continuing operations
 
4

 
1

 
(3
)
Net (losses)/earnings from discontinued operations, net of tax
 

 
(1
)
 
(1
)
 
 
 
 
 
 
 
Net earnings/(losses)
 
4

 

 
(4
)
 

36


Operating information for Belmond’s owned hotels for the years ended December 31, 2015, 2014 and 2013 is as follows:
 
Year ended December 31,
 
2015
 
2014
 
2013
 
 
 
 
 
 
 
Rooms Available
 
 
 
 
 
 
Europe
 
273,052

 
272,097

 
278,043

North America
 
255,216

 
262,562

 
274,677

Rest of world
 
371,207

 
374,855

 
370,079

Worldwide
 
899,475

 
909,514

 
922,799

 
 
 
 
 
 
 
Rooms Sold
 
 

 
 

 
 
Europe
 
169,371

 
152,369

 
159,394

North America
 
171,828

 
171,967

 
183,378

Rest of world
 
211,059

 
208,106

 
211,405

Worldwide
 
552,258

 
532,442

 
554,177

 
 
 
 
 
 
 
Occupancy (percentage)
 
 
 
 
 
 
Europe
 
62

 
56

 
57

North America
 
67

 
65

 
67

Rest of world
 
57

 
56

 
57

Worldwide
 
61

 
59

 
60

 
 
 
 
 
 
 
Average daily rate (in U.S. dollars)
 
 

 
 

 
 
Europe
 
689

 
783

 
784

North America
 
429

 
425

 
405

Rest of world
 
356

 
413

 
395

Worldwide
 
481

 
523

 
510

 
 
 
 
 
 
 
RevPAR (in U.S. dollars)
 
 

 
 

 
 
Europe
 
427

 
439

 
449

North America
 
289

 
278

 
270

Rest of world
 
202

 
229

 
226

Worldwide
 
295

 
306

 
306

 
2015 compared to 2014
 
 
 
 
 
 
Change %
Year ended December 31,
 
2015
 
2014
 
Dollars
 
Constant currency
 
 
 
 
 
 
 
 
 
Same Store RevPAR (in U.S. dollars)
 
 

 
 

 
 

 
 

Europe
 
427

 
439

 
(3
)%
 
19
%
North America
 
289

 
283

 
2
 %
 
3
%
Rest of world
 
200

 
233

 
(14
)%
 
9
%
Worldwide
 
297

 
312

 
(5
)%
 
11
%

The same store RevPAR data for 2015 and 2014 exclude the operations of Inn at Perry Cabin by Belmond, Belmond Miraflores Park and Belmond Eagle Island Lodge, one of the safari camps in Belmond Safaris, as these properties did not operate during one of the periods presented.

 

37


2014 compared to 2013
 
 
 
 
 
 
Change %
Year ended December 31,
 
2014
 
2013
 
Dollars
 
Constant currency
 
 
 
 
 
 
 
 
 
Same Store RevPAR (in U.S. dollars)
 
 

 
 

 
 

 
 

Europe
 
439

 
449

 
(2
)%
 
1
%
North America
 
282

 
272

 
4
 %
 
4
%
Rest of world
 
235

 
229

 
3
 %
 
11
%
Worldwide
 
313

 
313

 
 %
 
4
%
 
The same store RevPAR data for 2014 and 2013 exclude the operations of Inn at Perry Cabin by Belmond, Belmond El Encanto and Belmond Miraflores Park, as these properties did not operate during one of the periods presented.
 
Year ended December 31, 2015 compared to year ended December 31, 2014 and year ended December 31, 2014 compared to year ended December 31, 2013

Overview

2015 compared to 2014

Net earnings attributable to Belmond Ltd. for the year ended December 31, 2015 was $16.3 million ($0.16 per common share) on revenue of $551.4 million, compared with a net loss of $1.9 million ($0.02 per common share) on revenue of $585.7 million in the prior year. The net earnings in the year ended December 31, 2015 were primarily due to the $20.3 million gain on disposal of property, plant and equipment and equity method investments, largely as a result of the May 2015 sale of Hotel Ritz by Belmond, compared with a $4.1 million gain recognized in the year ended December 31, 2014. In the prior year, the Company recorded a loss on extinguishment of debt of $14.5 million, which did not recur in the current year. Additionally, there was a $9.8 million impairment charge and foreign exchange loss of $5.0 million recognized in the year ended December 31, 2015 compared with a $1.2 million impairment charge and a foreign exchange gain of $2.3 million recognized in the year ended December 31, 2014.

2014 compared to 2013

The net loss attributable to Belmond Ltd. for the year ended December 31, 2014 was $1.9 million ($0.02 per common share) on revenue of $585.7 million, compared with net loss of $31.6 million ($0.31 per common share) on revenue of $594.1 million in the prior year. The decrease in net loss was primarily because the year ended December 31, 2013 included an impairment of property, plant and equipment of $36.4 million and losses from discontinued operations of $5.3 million, compared with a $1.2 million impairment of property, plant and equipment and losses from discontinued operations of $3.8 million in the year ended December 31, 2014. In addition, the year ended December 31, 2014 recorded a gain on disposal of property, plant and equipment of $4.1 million relating to Inn at Perry Cabin by Belmond, as well as a loss on extinguishment of debt of $14.5 million compared with no gains on disposal of property, plant and equipment and a gain on extinguishment of debt of $3.5 million in the year ended December 31, 2013.


 

38


Revenue 
 
 
2015
 
2014
 
2013
Year ended December 31,
 
$ millions
 
$ millions
 
$ millions
 
 
 

 
 

 
 
Revenue:
 
 
 
 
 
 
Owned hotels:
 
 
 
 
 
 
Europe
 
200.0

 
212.7

 
222.0

North America
 
148.1

 
142.6

 
146.5

Rest of world
 
124.4

 
142.7

 
141.7

Total owned hotels
 
472.5

 
498.0

 
510.2

Part-owned/ managed hotels
 
5.2

 
6.0

 
5.9

Total hotels
 
477.7

 
504.0

 
516.1

Owned trains & cruises
 
65.5

 
74.3

 
73.8

Part-owned/ managed trains
 
8.2

 
7.4

 
4.2

Total trains & cruises
 
73.7

 
81.7

 
78.0

 
 
 
 
 
 
 
Total revenue
 
551.4

 
585.7

 
594.1


2015 compared to 2014

Total revenue was $551.4 million for the year ended December 31, 2015, a decrease of $34.3 million, or 6%, from $585.7 million for the year ended December 31, 2014. Total hotels revenue was $477.7 million for the year ended December 31, 2015, a decrease of $26.3 million, or 5%, from $504.0 million for the year ended December 31, 2014. The decrease in total hotels revenue was principally attributable to a $37.6 million and $25.7 million fall in revenue at the Company's European and Brazilian hotels due to unfavorable exchange rate movements, partially offset by growth on a constant currency basis of $24.9 million and $8.0 million, respectively. Revenue from trains and cruises was $73.7 million in the year ended December 31, 2015, a decrease of $8.0 million, or 10%, from $81.7 million in the year ended December 31, 2014 primarily as a result of revenue declines at the Company's two river cruise ships in Myanmar and Belmond Northern Belle.

2014 compared to 2013

Total revenue was $585.7 million for the year ended December 31, 2014, a decrease of $8.4 million, or 1%, from $594.1 million for the year ended December 31, 2013. Total hotels revenue was $504.0 million for the year ended December 31, 2014, a decrease of $12.1 million, or 2%, from $516.1 million for the year ended December 31, 2013. The decrease in total hotels revenue was partially due to a year-over-year drop at Belmond Grand Hotel Europe in Russia, as a result of the impact of the political situation in Ukraine and the depreciation of the ruble, and partially due to the March 2014 sale of Inn at Perry Cabin by Belmond. Revenue from trains and cruises was $81.7 million for the year ended December 31, 2014, an increase of $3.7 million, or 5%, from $78.0 million for the year ended December 31, 2013, as a result of an increase in revenue from the Company's PeruRail joint venture. Exchange rate movements were responsible for $14.3 million of the total decrease in total revenue.

Owned hotels - Europe
Year ended December 31,
 
2015
 
2014
 
2013
 
 
 
 
 
 
 
Rooms Available
 
273,052

 
272,097

 
278,043

Rooms Sold
 
169,371

 
152,369

 
159,394

Occupancy (percentage)
 
62

 
56

 
57

Average daily rate (in U.S. dollars)
 
689

 
783

 
784

RevPAR (in U.S. dollars)
 
427

 
439

 
449


39


 
 
 
 
 
 
Change %
Year ended December 31,
 
2015
 
2014
 
Dollars
 
Constant currency
 
 
 
 
 
 
 
 
 
Same Store RevPAR (in U.S. dollars)
 
427

 
439

 
(3
)%
 
19
%
 
 
 
 
 
 
Change %
Year ended December 31,
 
2014
 
2013
 
Dollars
 
Constant currency
 
 
 
 
 
 
 
 
 
Same Store RevPAR (in U.S. dollars)
 
439

 
449

 
(2
)%
 
1
%

2015 compared to 2014

Revenue was $200.0 million for the year ended December 31, 2015, a decrease of $12.7 million, or 6%, from $212.7 million for the year ended December 31, 2014. This decrease was attributable to unfavorable exchange rate movements which contributed to $37.6 million of the revenue decline, following the 37%, 16% and 7% year-over-year depreciation of the Russian ruble, euro and British pound, respectively, against the U.S. dollar. This was partially offset by revenue growth of $24.9 million on a constant currency basis at the Company’s European hotels. The Italian properties were responsible for $15.0 million of this growth, having achieved a 10% increase in constant currency ADR and a 4 percentage-point increase in occupancy. Additionally, Belmond Grand Hotel Europe recorded an increase in revenue of $5.2 million on a constant currency basis, having benefited from increased local and foreign demand and food and beverage growth with the opening of the new “Azia” restaurant. ADR in U.S. dollar terms for the European owned hotels segment decreased to $689 in the year ended December 31, 2015 from $783 in the year ended December 31, 2014. Occupancy increased to 62% in the year ended December 31, 2015 from 56% in the year ended December 31, 2014. Same store RevPAR decreased by 3% in U.S. dollars, to $427 in the year ended December 31, 2015 from $439 in the year ended December 31, 2014, but increased by 19% on a constant currency basis.

2014 compared to 2013

Revenue was $212.7 million for the year ended December 31, 2014, a decrease of $9.3 million, or 4%, from $222.0 million for the year ended December 31, 2013. Combined revenue growth of $6.7 million from the Company's hotels in continental Europe and the United Kingdom was offset by a $16.0 million decrease in revenue at Belmond Grand Hotel Europe. Of the $16.0 million revenue decline at Belmond Grand Hotel Europe, $7.7 million was due to the 22% depreciation of the Russian ruble which was made worse by the economic situation in Russia that had been adversely impacted by the falling price of oil. The remainder of the hotel's decline was attributable to a strong comparative 2013 period that benefited from the September 2013 G20 Summit in St Petersburg, Russia, lower food and beverage revenue due to ongoing restaurant renovation works, and cancellations related to the political situation in Ukraine which management is closely monitoring. Additionally, Belmond La Residencia continued to improve its performance with revenue growth of $1.9 million, or 14%, primarily due to a ten percentage-point increase in occupancy and a 10% increase in ADR that resulted predominantly from a change in the hotel's revenue management strategy. ADR in U.S. dollar terms for the European owned hotels segment decreased to $783 in the year ended December 31, 2014 from $784 in the year ended December 31, 2013 . Occupancy decreased to 56% in the year ended December 31, 2014 from 57% in the year ended December 31, 2013 . Same store RevPAR decreased by 2% in U.S. dollars, to $439 in the year ended December 31, 2014 from $449 in the year ended December 31, 2013, an increase of 1% on a constant currency basis.

Owned hotels - North America 
Year ended December 31,
 
2015
 
2014
 
2013
 
 
 
 
 
 
 
Rooms Available
 
255,216

 
262,562

 
274,677

Rooms Sold
 
171,828

 
171,967

 
183,378

Occupancy (percentage)
 
67

 
65

 
67

Average daily rate (in U.S. dollars)
 
429

 
425

 
405

RevPAR (in U.S. dollars)
 
289

 
278

 
270

Same Store RevPAR (in U.S. dollars)
 
289

 
283

 
272



40


 
 
 
 
 
 
Change %
Year ended December 31,
 
2015
 
2014
 
Dollars
 
Constant currency
 
 
 
 
 
 
 
 
 
Same Store RevPAR (in U.S. dollars)
 
289

 
283

 
2
%
 
3
%
 
 
 
 
 
 
Change %
Year ended December 31,
 
2014
 
2013
 
Dollars
 
Constant currency
 
 
 
 
 
 
 
 
 
Same Store RevPAR (in U.S. dollars)
 
282

 
272

 
4
%
 
4
%
 
2015 compared to 2014

Revenue was $148.1 million for the year ended December 31, 2015, an increase of $5.5 million, or 4%, from $142.6 million for the year ended December 31, 2014. This revenue increase was led by a $2.8 million growth at Belmond El Encanto as it continued to benefit from its second full year of operations. In addition, there was a $2.4 million increase in revenue at Belmond Charleston Place, following increased occupancy and strong ADR growth as a result of the hotel’s renovated room product. Revenue increases of $1.6 million in the other North American owned hotels were offset by the March 2014 sale of Inn at Perry Cabin by Belmond, which had generated revenues of $1.3 million in the year ended December 31, 2014. ADR for the North American owned hotels segment increased to $429 in the year ended December 31, 2015 from $425 in the year ended December 31, 2014. Occupancy increased to 67% in the year ended December 31, 2015 from 65% in the year ended December 31, 2014 . Same store RevPAR (which excludes Inn at Perry Cabin by Belmond) increased by 2% to $289 in the year ended December 31, 2015 from $283 in the year ended December 31, 2014.

2014 compared to 2013

Revenue was $142.6 million for the year ended December 31, 2014, a decrease of $3.9 million, or 3%, from $146.5 million for the year ended December 31, 2013. The decrease was primarily the result of the March 2014 sale of Inn at Perry Cabin by Belmond which generated revenue of $1.3 million in the year ended December 31, 2014 compared with $12.0 million in year ended December 31, 2013. Partially offsetting this decrease was revenue growth of $4.2 million at Belmond El Encanto, which opened in March 2013 and hence saw a full year of operations in 2014, and $2.4 million at Belmond Charleston Place due to strong ADR and food and beverage growth, with the positive effects of the first stage of refurbishment starting to manifest. ADR for the North American owned hotels segment increased to $425 in the year ended December 31, 2014 from $405 in the year ended December 31, 2013. Occupancy decreased to 65% in the year ended December 31, 2014 from 67% in the year ended December 31, 2013. Same store RevPAR (which excludes Belmond El Encanto and Inn at Perry Cabin by Belmond) increased by 4% to $282 in the year ended December 31, 2014 from $272 in the year ended December 31, 2013.

 Owned hotels - Rest of world 
Year ended December 31,
 
2015
 
2014
 
2013
 
 
 
 
 
 
 
Rooms Available
 
371,207

 
374,855

 
370,079

Rooms Sold
 
211,059

 
208,106

 
211,405

Occupancy (percentage)
 
57

 
56

 
57

Average daily rate (in U.S. dollars)
 
356

 
413

 
395

RevPAR (in U.S. dollars)
 
202

 
229

 
226

Same Store RevPAR (in U.S. dollars)
 
200

 
233

 
229

 
 
 
 
 
 
Change %
Year ended December 31,
 
2015
 
2014
 
Dollars
 
Constant currency
 
 
 
 
 
 
 
 
 
Same Store RevPAR (in U.S. dollars)
 
200

 
233

 
(14
)%
 
9
%

41


 
 
 
 
 
 
Change %
Year ended December 31,
 
2014
 
2013
 
Dollars
 
Constant currency
 
 
 
 
 
 
 
 
 
Same Store RevPAR (in U.S. dollars)
 
235

 
229

 
3
%
 
11
%

2015 compared to 2014

Revenue was $124.4 million for the year ended December 31, 2015, a decrease of $18.3 million, or 13%, from $142.7 million in the year ended December 31, 2014. This decrease was primarily attributable to the $17.7 million combined revenue decline at the Company’s two Brazilian hotels, largely due to the 30% year-over-year depreciation in the Brazilian real against the U.S. dollar. Additionally, there was a decrease in revenue of $3.2 million at Belmond Safaris as a result of the closure of Belmond Eagle Island Lodge for renovation in January 2015. Partially offsetting these decreases in 2015 was a $3.2 million growth at Belmond Miraflores Park, which was closed for renovation from December 2013 to mid-April 2014. ADR in U.S. dollar terms for the Rest of world segment decreased by 14% to $356 for the year ended December 31, 2015 from $413 in the year ended December 31, 2014. Occupancy increased to 57% in the year ended December 31, 2015 from 56% in the year ended December 31, 2014. Same store RevPAR in U.S. dollars (which excludes Belmond Miraflores Park and Belmond Eagle Island Lodge) decreased by 14% to $200 for the year ended December 31, 2015 from $233 in the year ended December 31, 2014, an increase of 9% on a constant currency basis.

2014 compared to 2013

Revenue was $142.7 million for the year ended December 31, 2014, an increase of $1.0 million, or 1%, from $141.7 million for the year ended December 31, 2013. This increase was largely attributable to the strong performance of the Company's two Brazilian hotels, due largely to the 2014 FIFA World Cup, which saw combined revenue growth of $6.3 million. This was in spite of the 9% year-over-year depreciation of the Brazilian real. Combined revenue growth on a constant currency basis was $13.0 million for these two hotels. Belmond Mount Nelson Hotel in South Africa had a revenue increase of $1.4 million or 10% due to a six percentage-point increase in occupancy over the year ended December 31, 2013 as the weaker rand increased the attractiveness of the destination. The revenue growth for the segment as a whole was partially offset by a $1.6 million decline in revenue in Belmond Miraflores Park, which was closed for renovation from December 2013 through the middle of April 2014. In addition, revenue for the Company's Asian hotels and Belmond Safaris were down $3.6 million and $1.5 million year-over-year respectively, primarily as a result of the political unrest in Bangkok and the Ebola outbreak elsewhere in Africa, leading to cancellations at the safari camps. ADR in U.S. dollar terms for the Rest of world segment increased to $413 for the year ended December 31, 2014 from $395 in the year ended December 31, 2013. Occupancy decreased to 56% in the year ended December 31, 2014 from 57% in the year ended December 31, 2013. Same store RevPAR (which excludes Belmond Miraflores Park) increased by 3% in U.S. dollars to $235 in the year ended December 31, 2014 from $229 in the year ended December 31, 2013, an increase of 11% on a constant currency basis.

Part-owned/ managed hotels

2015 compared to 2014

Revenue was $5.2 million in the year ended December 31, 2015, a decrease of $0.8 million, or 13%, from $6.0 million in the year ended December 31, 2014. This decrease was primarily due to lower management fees received from Hotel Ritz by Belmond which was sold in May 2015.

2014 compared to 2013

Revenue was $6.0 million in the year ended December 31, 2014, an increase of $0.1 million, or 2%, from $5.9 million in the year ended December 31, 2013. This decrease was primarily due to growth at Hotel Ritz by Belmond, which saw an eight percentage-point increase in occupancy as a result of new sales strategies and continued signs of improvement in the Spanish economy.

Owned trains and cruises
 
2015 compared to 2014

Revenue was $65.5 million in the year ended December 31, 2015, a decrease of $8.8 million, or 12%, from $74.3 million in the year ended December 31, 2014. Exchange rate movements accounted for $4.0 million of the revenue decline, following the 16%

42


and 7% year-over-year depreciation of the euro and British pound, respectively, against the U.S. dollar. There was a combined revenue decrease of $4.6 million at Belmond Orcaella and Belmond Road to Mandalay, Belmond’s two river cruise ships in Myanmar, as a result of increased local competition, and a $1.6 million fall in revenue at Belmond Northern Belle following a reduction in passenger numbers.

2014 compared to 2013

Revenue was $74.3 million in the year ended December 31, 2014, an increase of $0.5 million, or 1%, from $73.8 million in the year ended December 31, 2013. The increase was driven by Belmond Orcaella, Belmond’s river cruise operation launched in July 2013, which contributed $1.9 million of revenue growth. The Venice Simplon-Orient-Express recorded a revenue increase of $1.4 million, primarily due to the appreciation of the British pound sterling against the U.S. dollar. Belmond Northern Belle also saw revenue growth of $0.9 million, having operated nine more trips in the year ended December 31, 2014 compared with the year ended December 31, 2013, and additionally benefited from the stronger British pound sterling. This growth was offset by a decrease of $2.0 million from Belmond Road to Mandalay which suffered from increased competition in the year ended December 31, 2014.

Part-owned/ managed trains
 
2015 compared to 2014

Revenue was $8.2 million in the year ended December 31, 2015, an increase of $0.8 million, or 11%, from $7.4 million in the year ended December 31, 2014, due to an increase in management fees from the Company’s PeruRail joint venture, as a result of an increase in tickets sold and average ticket prices.

In June 2015, PeruRail entered into an agreement for a period of 15 years with a Peruvian subsidiary of MMG Limited, a minerals and mining company that is publicly traded on the Hong Kong stock exchange, to transport copper concentrate from the Las Bambas mine. In connection with this project, PeruRail obtained non-recourse financing of $131 million in February 2016. PeruRail commenced transport of the copper concentrate in January 2016.

2014 compared to 2013

Revenue was $7.4 million in the year ended December 31, 2014, an increase of $3.2 million, or 76%, from $4.2 million in the year ended December 31, 2013. The increase was due to an increase in management fee rates at the Company’s PeruRail joint venture.
  
Cost of services

2015 compared to 2014

Cost of services was $243.6 million in the year ended December 31, 2015, a decrease of $19.0 million, or 7%, from $262.6 million in the year ended December 31, 2014 . Cost of services as a percentage of revenue decreased slightly to 44% for the year ended December 31, 2015 from 45% for the year ended December 31, 2014.

2014 compared to 2013

Cost of services was $262.6 million in the year ended December 31, 2014, a decrease of $5.3 million, or 2%, from $267.9 million in the year ended December 31, 2013. Cost of services as a percentage of revenue remained consistent at 45% of revenue for the years ended December 31, 2014 and 2013.
 
Selling, general and administrative expenses
 
2015 compared to 2014

Selling, general and administrative expenses was $206.2 million in the year ended December 31, 2015, a decrease of $13.4 million, or 6%, from $219.6 million in the year ended December 31, 2014. Selling, general and administrative expenses as a percentage of revenue remained consistent at 37% for the year ended December 31, 2015 and 2014 despite the increase in central costs. This was primarily due to the weakening of the euro and Mexican peso against the U.S. dollar, which in turn has benefited Belmond La Samanna and Belmond Maroma Resort and Spa as these properties incur the majority of their expenses in euros and Mexican pesos, respectively.

43



Central costs within selling, general and administrative expenses were $45.9 million in the year ended December 31, 2015 (including $6.7 million of non-cash share-based compensation), an increase of $6.1 million, or 15%, from $39.8 million in the year ended December 31, 2014 (including $7.9 million of non-cash share-based compensation). Central costs included $3.7 million of expenses and a $1.8 million credit to share-based compensation expense in relation to the former CEO’s departure. The remaining increase is largely due to additional costs incurred in the year ended December 31, 2015 relating to the migration of the Company's tax residency to the United Kingdom and central marketing costs. As a percentage of revenue, central costs (excluding non-cash share-based compensation expense) increased to 7% for the year ended December 31, 2015 from 5% for the year ended December 31, 2014.

2014 compared to 2013

Selling, general and administrative expenses was $219.6 million in the year ended December 31, 2014, a decrease of $7.7 million, or 3%, from $227.3 million in the year ended December 31, 2013. Selling, general and administrative expenses as a percentage of revenue decreased slightly to 37% for the year ended December 31, 2014 from 38% for the year ended December 31, 2013.
Selling, general and administrative expenses in the year ended December 31, 2013 included pre-opening expenses of $3.0 million for Belmond El Encanto and Belmond Orcaella.

Central costs within selling, general and administrative expenses were $39.8 million in the year ended December 31, 2014 (including $7.9 million of non-cash share-based compensation), a decrease of $1.3 million, or 3%, from $41.1 million in the year ended December 31, 2013 (including $10.4 million of non-cash share-based compensation). This decrease is the result of year- over-year reductions in share-based compensation costs of $2.5 million and payroll bonus costs of $1.7 million offset by an increase of $3.9 million in central marketing costs related to the investment in the Belmond brand. As a percentage of revenue, central costs (excluding non-cash share-based compensation expense) remained consistent at 5% for the years ended December 31, 2014 and 2013.
 

44


Segment profit/(loss)

Segment performance is evaluated based upon segment earnings before gains/(losses) on disposal, impairments, central costs, interest income, interest expense, foreign currency, tax (including tax on earnings from unconsolidated companies), depreciation and amortization (“segment profit”). Segment performance for the years 2015, 2014 and 2013 is analyzed as follows:
 
 
2015
 
2014
 
2013
Year ended December 31,
 
$ millions
 
$ millions
 
$ millions
 
 
 
 
 
 
 
Segment profit:
 
 
 
 
 
 
Owned hotels:
 
 
 
 
 
 
Europe
 
65.4

 
62.8

 
63.8

North America
 
31.6

 
24.0

 
23.2

Rest of world
 
31.3

 
36.5

 
36.0

Total owned hotels
 
128.3

 
123.3

 
123.0

Part-owned/ managed hotels
 
4.1

 
5.2

 
2.3

Total hotels
 
132.4

 
128.5

 
125.3

Owned trains & cruises
 
6.7

 
7.3

 
8.5

Part-owned/ managed trains
 
18.9

 
16.2

 
14.3

Total trains & cruises
 
25.6

 
23.5

 
22.8

 
 
 
 
 
 
 
Reconciliation to net earnings/(losses):
 
 
 
 
 
 
Total segment profit
 
158.0

 
152.0

 
148.1

 
 
 
 
 
 
 
Gain on disposal of property, plant and equipment
 
20.3

 
4.1

 

Impairment of goodwill
 
(9.8
)
 

 

Impairment of property, plant and equipment
 

 
(1.2
)
 
(36.4
)
Central costs
 
(45.9
)
 
(39.8
)
 
(41.1
)
Depreciation and amortization
 
(50.5
)
 
(52.0
)
 
(48.7
)
(Loss)/gain on extinguishment of debt
 

 
(14.5
)
 
3.5

Other income
 

 
1.3

 

Interest income, interest expense and foreign currency, net
 
(36.2
)
 
(33.1
)
 
(32.3
)
Provision for income taxes
 
(17.0
)
 
(15.5
)
 
(17.6
)
Share of (provision for)/benefit from income taxes of unconsolidated companies
 
(1.5
)
 
0.7

 
(1.7
)
 
 
 
 
 
 
 
Earnings/(losses) from continuing operations
 
17.4

 
2.0

 
(26.2
)
Losses from discontinued operations
 
(1.5
)
 
(3.8
)
 
(5.3
)
 
 
 
 
 
 
 
Net earnings/(losses)
 
15.9

 
(1.8
)
 
(31.5
)

2015 compared to 2014