10-K 1 bel-20171231x10k.htm 10-K Document

 
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, 2017
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, a smaller reporting company or an emerging growth company.  See definitions of “large accelerated filer”, “accelerated filer”, “smaller reporting company” and "emerging growth 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)
 
Emerging growth company o
 
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. o
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, 2017 (the last business day of the registrant’s second fiscal quarter in 2017) was approximately $1,335,000,000.
 As of February 15, 2018, 102,394,570 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 18(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 Company's 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 46 properties (excluding one additional business scheduled for a future opening, the Belmond Cadogan Hotel in London, England), consisting of 36 highly individual deluxe hotels, one stand-alone restaurant, seven tourist trains and two 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 46 properties operating in 24 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 2017, 2016 and 2015 for Belmond's business segments and geographic areas are presented in Note 24 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, owned trains and cruises, part-owned/managed hotels, and part-owned/managed trains.

Belmond revised the order of the presentation of these segments in the year ended December 31, 2016 and included a new sub-total to show management fees earned by the Company. In addition, Belmond reclassified certain expenses associated with the Company’s development team from the Part-owned/managed hotels segment to central costs. Prior periods have been re-presented to reflect the current period presentation. There has not been a material impact on the consolidated financial statements.
 
Hotels represent the largest part of Belmond’s business, contributing 86% of revenue in 2017, 87% of revenue in 2016 and 87% in 2015. Trains and cruises accounted for 13% of revenue in 2017, 13% of revenue in 2016 and 13% in 2015. Approximately 80% of Belmond’s customer revenue in 2017 was from leisure travelers, with approximately 44% originating from North America, 41% from Europe and the remaining 15% from elsewhere in the world.
 
Belmond’s worldwide portfolio of hotels currently in operation consists of 3,203 individual guest rooms and multiple-room suites, each known as a “key”. Hotels owned by Belmond in 2017 achieved an average daily room rate (“ADR”) of $510 (2016 - $490; 2015 - $481) and a revenue per available room (“RevPAR”) of $309 (2016 - $298; 2015 - $295).

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 (that permits termination on the fifth anniversary

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of the agreement) with the new owner. In May 2015, Belmond, together with its joint venture partner, each sold its 50% ownership interest in the entity which owned the Hotel Ritz by Belmond in Madrid, Spain and Belmond ended its agreement to manage the hotel. See Note 7 to the Financial Statements. On November 6, 2017, the entity that leased Belmond Orcaella provided notice of termination to the owner in respect of its charter agreement and on November 2, 2017, Belmond sold its interest in the entity which wholly owned Belmond Northern Belle. See Note 5 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—"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 3.00% margin. The Company amended and restated its senior secured credit facility on July 3, 2017 to increase the term loan, extend the maturity dates on the revolving credit facility and the term loan to July 3, 2022 and July 3, 2024, respectively, and decrease the interest rates imposed on borrowings. The amended and restated credit agreement consists of a $603,434,000 seven-year term loan and a $100,000,000 five-year, multi-currency revolving credit facility. The term loan consists of a $400,000,000 U.S. dollar-denominated tranche and a €179,000,000 million euro-denominated tranche ($203,434,000 as of the completion date). See Note 11 to the Financial Statements.

In August 2014, Charleston Center LLC entered into an $86,000,000 loan secured on its real and personal property. This loan had no amortization and is non-recourse to Belmond. This loan had an August 2019 maturity and an interest rate of LIBOR plus 2.12% per annum. In June 2016, Charleston Center LLC refinanced this loan with a $112,000,000 new loan with the same August 2019 maturity. The interest rate on the new loan is LIBOR plus 2.35% per annum, has no amortization and is non-recourse to Belmond. The additional proceeds were used to repay a 1984 development loan from a municipal agency in the principal amount of $10,000,000 and accrued interest of $16,819,000. In connection with the early repayment of the loan, Belmond negotiated a discount that resulted in a net gain, reported in the statements of consolidated operations during the year ended December 31, 2016, of $1,200,000 upon the extinguishment of the debt, including the payment of a tax indemnity to our partners in respect of their allocation of income from the discount arising on the cancellation of indebtedness. See Note 11 to the Financial Statements.

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 at the end of 2018 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.

On August 30, 2016, the Company commenced operations of Belmond Grand Hibernian, the first overnight luxury rail experience of its kind in Ireland. The luxury sleeper train accommodates up to 40 guests in 20 en-suite cabins. Belmond Grand Hibernian builds 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 and Hiram Bingham in Peru.

On April 7, 2017, the Company and its joint venture partner acquired Las Casitas, a 20-key resort located in Colca Canyon in southern Peru. It is located on a 24 hectare site with 20 luxury individual bungalows. A soft goods renovation was completed in 2017, during which time the property remained open.

On May 4, 2017, PeruRail commenced operations of Belmond Andean Explorer, a luxury sleeper train running through the Peruvian Highlands from Cusco to Lake Titicaca and Arequipa, accommodating up to 68 passengers. It consists of 21 carriages, which

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Belmond owned and operated in Australia through 2003 and sold to PeruRail in 2016. The train was shipped from Australia to Peru and underwent renovations to its interiors to a luxury standard.

On May 26, 2017, the Company acquired Cap Juluca, a 96-key luxury resort on the Caribbean Island of Anguilla, British West Indies. At the same time, the Company also entered into a 125-year ground lease with the Government of Anguilla for property that comprises approximately 167 acres, including approximately 250,000 square feet of additional developable beachfront land. See Note 4 to the Financial Statements. The resort is currently undergoing reconstruction and renovations following its acquisition and the impact of Hurricanes Irma and Jose in September 2017. See Note 8 to the Financial Statements.

On February 8, 2018, the Company acquired Castello di Casole resort and estate, which comprise the 39-key Castello di Casole hotel, together with high-quality vineyards and olive groves, extensive wooded Tuscan countryside, and 48 residential plots, of which 16 remain for sale, with three subject to non-binding reservation letters of intent to purchase and two expected to be converted into new villas as part of the hotel inventory. See Note 26 to the Financial Statements.

Owned HotelsEurope
 
Italy
 
Belmond Hotel Cipriani—96 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 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. In 2016, 15 rooms in the Palazzo Vendramin and Palazzetto were refurbished. In 2017, the library was refurbished and converted into a new junior suite, along with the refurbishment of three existing keys, the addition of four cabanas in the pool area, and the creation of a casual trattoria restaurant, the Giudecca 10 within the existing breakfast room. During the 2017/2018 closure, the Cip's Club restaurant will be renovated and the Oro Restaurant Terrace 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. In 2016, ten suites and guest rooms were refurbished at Belmond Hotel Splendido and a further ten guest rooms were refurbished in 2017. Also in 2017, the facade of Belmond Hotel Splendido was restored and balconies added to 12 guest rooms. During the 2017/2018 closure, ten guest rooms will be refurbished and the Ginepro meeting room will be converted into two suites and one junior suite.
 
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. In 2016, the property created a new function facility to cater to the popular wedding and celebrations market. In 2017, four keys were refurbished, one key was added by converting the Kid's Club into a guestroom, a new outdoor bar within the Italian garden was added, and the ground floor public areas were refurbished.
 
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 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. In 2017, 15 keys were refurbished and one junior suite was added in an underused public area. During the 2017/2018 closure, a junior suite will be added, along with a new hair salon. In addition, a staff dining room will be relocated to allow for the addition of a new spa and fitness center will be added. The adjacent Villa Margarita was purchased in 2017 and will be converted into a guest house with two bedrooms.

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. In 2017, 25 keys were renovated in the main hotel building and the public areas of Villa Flora were renovated.

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Belmond Villa Sant’Andrea—69 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 2015/16 winter closure, four new units were 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. In 2017, 26 keys were refurbished and improvements were made to the outdoor restaurant and bar. During the 2017/2018 closure, the existing banquet room will be converted into three junior suites with the added flexibility to use one of the suites as a meeting room, an additional 26 keys will be refurbished, and a new outdoor lightweight structure will be added for banqueting. 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.

Castello di Casole—39 keys—is located within easy access of both Florence and Sienna. A historic castle dating from the 10th century, the resort and estate span 1,500 hectares and comprise the Castello di Casole hotel, together with high-quality vineyards and olive groves, extensive wooded Tuscan countryside, and 48 residential plots, of which 16 remain for sale, with three subject to non-binding reservation letters of intent to purchase. Starting in 2018, the Company expects to invest $9.0 million in a phased refurbishment of the hotel over four years, including the addition of two new villas on two residential plots that will be retained, bringing the resort's total key count to 41. The resort and estate will be rebranded upon the Company assuming management of the property.
 
All of these Italian properties operate seasonally, closing for varying periods during the winter.
 
Spain

Belmond La Residencia—74 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 and the units were added to the hotel inventory in the spring of 2017. During the 2017/2018 closure, 15 rooms will be renovated to create 12 guest rooms and one designer suite.

Portugal
 
Belmond Reid’s Palace—158 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. In 2017, renovations were completed in the main building with the relocation of the reception and main entrance, the breakfast room was converted into meeting rooms, and the Pool Restaurant and Bar were renovated.

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 a four-year commitment that commenced January 2015 to remain the chef-patron at the hotel. The hotel recently expanded its event and meeting space to increase its appeal to social and corporate groups. In 2016, the La Bourgogne private dining room was renovated.

Belmond Cadogan —54 keys—is a 127-year old hotel located in the heart of London on Sloane Street. When it opens, as currently expected by year-end 2018, the Belmond Cadogan will reflect a thorough renovation that will bring contemporary classic design to this historic collection of buildings. The scope of the renovation includes the complete refurbishment of all public areas and the reconfiguration of 64 keys to 54 to create larger junior suites and suites. Built in 1887 in the Queen Anne style, the hotel has played an integral role in the social history of the Kensington and Chelsea areas. Belmond will operate the hotel under a third-party hotel management agreement.
 

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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 commenced renovations to its famous Krysha ballroom, which were completed in 2017. In 2017, renovation work commenced on the replacement of seven elevators with a planned completion at the end of 2019, refurbishment of 114 guest rooms including upgrades to the heating, ventilation, and air conditioning systems, and renovations to the Mezzanine Café to be completed in mid-2018.
 
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 22 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 refurbished a retail outlet space, converting it into an upscale sports bar with direct access to Market Street, a busy main street in Charleston. Other upgrades in 2016 included the addition of an outdoor Roof Terrace & Bar, the renovation and expansion of the Thoroughbred Bar increasing capacity by 40%, and the completion of the renovation of the ballroom and conference facilities. In 2017, the reception and spa were renovated and in December 2017, the property commenced the renovation of the Charleston Grill, with an expected completion planned for early 2018.
 
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 outstanding loans to the hotel. 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 6 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 Cap Juluca—96 keys—is located on the island of Anguilla in the British West Indies. It is set amid 179 acres of stunning tropical landscape and inland waterways overlooking the nearby St. Maarten mountains. Belmond Cap Juluca is an exclusive luxury hotel built in Greco-Moorish style on a white sandy beach. The Company acquired the property in May 2017 and also entered into a 125-year ground lease for property that comprises approximately 167 acres, including approximately 250,000 square feet of additional developable land. The property is undergoing a full renovation following its acquisition and the impact of Hurricanes Irma and Jose in September 2017, the renovations to include the addition of 20 new keys and two new-build casitas, a new spa and fitness center, outdoor pool, beach bar, meeting space and the renovation of two existing restaurants and bar. The property is currently expected to reopen in November 2018. See Notes 4 and 8 to the financial statements.


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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. The remaining land is available for future expansion. The hotel suffered damage from Hurricanes Irma and Jose in September 2017 during the hotel's annual closure. The renovation of ten keys had commenced and remedial works were also underway for a cliff stabilization project. The cliff stabilization project has been completed and the Company is currently contemplating a substantial reconstruction and renovation program conditioned on a significant restructuring of the cost structure of the hotel. If the Company proceeds with the reconstruction and renovation program, the expected re-opening would be in December 2018. See Note 8 to the financial statements.
 
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. The hotel purchased a beach concession on an adjacent piece of land in 2016. Belmond also owns a 28-acre tract adjacent to Belmond Maroma Resort and Spa for hotel expansion or construction of other improvements. Phase 1 planning efforts commenced in 2017 in advance of a planned renovation in 2019 to include the addition of ten keys and two new event palapas, along with upgrades to infrastructure and landscaping.
 
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. In 2017, a phased guestroom renovation of all 37 keys and public areas, along with the addition of a spa and fitness center, commenced while the hotel remained open with completion scheduled for early 2018.
 
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 roof-top 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. Upgrades in 2017 included the renovation of the Pergula Restaurant, which is the main three-meal restaurant for the hotel located on the ground level with seating overlooking the pool, upgrades to the pool area, and a new energy management system. Third parties own a less than 2% minority interest in the hotel.
 
Belmond Hotel das Cataratas—187 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. In 2017, the hotel completed the renovation of 23 keys. 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 thereafter claimed against the Federal Government for breach of the lease and received interlocutory relief at the trial court in the form of a 25% lease reduction and an injunction on the Federal Government from taking any action inconsistent with the court's decision, which was affirmed twice on appeal. The Federal Court subsequently issued a preliminary decision in October 2017 denying in part the Company's claim for modification of the lease concession and ordering the Company to pay the stated rent in the lease. This ruling has also been affirmed on appeal. See "Item 3—Legal Proceedings."
 
Belmond Miraflores Park—89 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 to the city's commercial and cultural centers. Following a five-month closure for a $7,500,000 renovation project, Belmond reopened the hotel in April 2014

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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 converted former office space on its third floor into eight executive guest rooms. In 2017, planning commenced for the renovation of the lobby and three garden suites, scheduled to be completed in 2018. See also "Item 3—Legal Proceedings."
 
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 and in 2016, 48 keys in the main building were upgraded and refurbished. In 2017, significant upgrades were made to the entry drive, porte cochere, reception lobby, and Tea Lounge and Bar. 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 2015, Belmond closed Belmond Eagle Island Lodge to undertake a full refurbishment of the property and re-opened it in November 2015. Conde Nast Traveller included Belmond Eagle Island Lodge on its 2016 Hotlist and the property received an award from International Property & Travel in 2016. Belmond Savute Elephant Lodge closed in November 2017 for a full renovation and is expected to open in May 2018. The renovation includes upgrades to the infrastructure, enhancements to finishes, new food and beverage outlets including outdoor dining, a swimming pool, and the addition of a spa tent.

Asia
 
Belmond Napasai—68 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 and garden cottages are arranged in sea view on a total site of about 40 owned acres, which includes 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.
 
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 has taken appropriate legal steps to protect its interests and is currently seeking to enforce its Singapore arbitral award for $8.5 million against the owner in Indonesia. See Item 3—Legal Proceedings.
 
Belmond La Résidence d’Angkor—59 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 completed a full renovation of its guest rooms and added a pool suite by combining two keys overlooking the pool in 2016.
 

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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

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 2015, Belmond completed 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. In 2017, we commenced the first phase of planning for the soft goods renovation of the lobby bar and two restaurants, which is expected to be completed in 2018.

Belmond Palacio Nazarenas—55 keys—is located adjacent to Belmond Hotel Monasterio in Cusco and is a former palace and convent which the joint venture has rebuilt as a separate hotel and opened in June 2012. This is an all-suite hotel arranged around courtyards and features 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. In 2017, the joint venture commenced the first phase of planning to upgrade the main restaurant, which is expected to be completed in 2018.

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 2016, the joint venture completed a three-year phased renovation of all guest rooms and suites, as well as the hotel's reception and public areas. In 2017, the Tinkuy buffet restaurant was refurbished. The joint venture 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 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 a 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

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acquired an adjacent parcel of land of approximately two and a half acres on which the joint venture is contemplating further development.

Belmond Las Casitas—20 keys—is located in Colca Canyon, a river canyon in southern Peru famed for being one of the world's deepest and a habitat for the giant Andean condor and having pre-Inca roots. It is located on a 24 hectare estate with 20 luxury individual bungalows, each with a private terrace, plunge pool, fireplace, indoor and outdoor shower, and hot tub. The resort includes a library, outdoor pool, spa, and restaurant and bar, with an on-property farm that provides organic produce for the restaurant. The Company acquired the property through its 50%/50% joint venture in Peruvian hotels in May 2017 and a soft goods renovation was completed in 2017.

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 in 2016 and 2017 respectively, air conditioning and Wi-Fi were added throughout the train. During the 2017/2018 winter closure, one carriage will be converted into three grand suites with en-suite showers. 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 weekend trips when passengers stay at local hotels. Full fine dining is offered on every departure.
 
Belmond Royal Scotsman is a luxury sleeper train owned by Belmond and 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 40 passengers. In 2017, the bar/observation car was renovated and a spa car with two treatment rooms was added. 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. A soft goods renovation of the public areas was completed in 2017.

Belmond Grand Hibernian is a luxury sleeper train owned by Belmond and comprises ten Georgian-styled railway cars, including five sleeping cars (each compartment with a private bathroom), two dining cars, a bar/observation car and accommodates up to 40 passengers. It operates from April to October and travels on three itineraries through the Irish countryside affording passengers the opportunity to visit castles, lakes, towns, whiskey distilleries and other places of interest. This train commenced service in August 2016 through mid-October 2016 and began its 2017 season in April.

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 a 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.

Belmond Afloat in France consists of five luxury river and canal boats (called péniche-hôtels) owned by Belmond and operates 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. It is anticipated that during 2018, two additional canal boats accommodating eight passengers each will be added to the fleet, which are expected to operate in the Champagne, Alsace and other regions of France.

Belmond Northern Belle and Belmond Orcaella—As noted in the "Introduction" above and in Note 5 to the Financial Statements, on November 2, 2017, Belmond sold its interest in the entity that owned Belmond Northern Belle and on November 6, 2017, the entity that leased Belmond Orcaella provided notice of termination to the owner in respect of its charter agreement.

All Belmond trains and cruises are available for private charter.

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Part-Owned/Managed Trains

PeruRail: Belmond and local Peruvian investors formed two 50%/50% joint venture companies (PeruRail S.A. ("PeruRail") and Ferrocarril Transandino S.A. ("FTSA")). FTSA was awarded in 1999 a 30-year concession to operate the track and other infrastructure of the state-owned railways in southern and southeastern Peru. The concession had an initial term of 30 years from 1999 with the option to apply for six 5-year extensions. In December 2017, FTSA received a denial of its third extension request. As a result, FTSA can no longer conclude that the remaining three extensions are probable and has therefore reduced its expectation of the total expected life of the concession to the contracted term of 35 years of which 17 years are remaining as of December 31, 2017. This triggered an impairment test of the assets within the joint venture and the shorter time period over which to recover the carrying value of the assets has led to an impairment charge being recorded in the year ended December 31, 2017. The life of the concession is now expected to expire in 2034. See Note 7 to the Financial Statements.

PeruRail operates passenger and freight services in southern and southeastern Peru. 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. Another carrier operates 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 has expanded 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 ended December 31, 2017 compared to year ended December 31, 2016 and year ended December 31, 2016 compared to year ended December 31, 2015—Part-Owned/Managed trains, 2016 compared to 2015". PeruRail can continue to run trains on the track after the conclusion of FTSA's concession. PeruRail, along with other third-party operators, pays a track access fee to FTSA and FTSA pays the Peruvian government fees related to traffic levels and the use of rail infrastructure, locomotives and rolling stock.

The Cusco-Machu Picchu line connects four of Belmond’s Peruvian hotels, allowing inclusive tours served by the Belmond Hiram Bingham luxury daytime tourist train comprising two dining cars and a bar/observation car with capacity up to 84 passengers. PeruRail also operates a daytime tourist train that runs on the Cusco-Puno route through the High Andes mountains. In 2017, a new luxury sleeper train was launched under the name Belmond Andean Explorer, which runs through the Peruvian Highlands from Cusco to Lake Titicaca and Arequipa. This train consists of 21 carriages, which Belmond owned and operated in Australia until 2003 and sold to PeruRail in 2016. The train was shipped from Australia to Peru where it underwent a full renovation. It carries 68 passengers in 34 en-suite cabins, with two dining cars, a lounge car, and an observation car.
 
Eastern & Oriental Express: During its operating season from September to April, 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 Kuala Kangsar 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 carries up to 82 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 2017 made up approximately 72% of total hotel room nights, with meeting, social, and incentive groups accounting for the remaining 28%. 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 aim 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 inspiring destinations in the world. In 2016, Belmond announced a strategic growth plan intended to grow its business by focusing on three key areas:
 

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Driving top-line growth and bottom-line results 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, with a particular focus on:
maximizing RevPAR while controlling costs associated with incremental revenue;
upgrading core systems to drive greater demand, improve customer relationships and increase website conversion ratios;
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;
putting a greater emphasis on margin improvements; and
increasing the utilization of its trains and cruises by adding departures and, for PeruRail, expanding its contracted freight business.

Continuing the Company's efforts to build brand awareness -- Many of Belmond’s individual properties, such as Belmond Hotel Cipriani, Belmond Grand Hotel Europe, Belmond Copacabana Palace and Belmond Mount Nelson Hotel, have distinctive local character and strong brand identities. Prior to introducing the Belmond brand in 2014, the Company promoted its individual hotel properties and the Venice Simplon-Orient-Express train through the “Orient-Express" sub-brand. In 2014, the Company elected to migrate to more of a "hard-brand" strategy and now markets its collection under the Belmond brand. At the same time, the Company 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, the Company also entered into an agreement with SNCF to terminate (with effect from December 14, 2014) the "Orient-Express" license for hotel use, without any cost or penalty.

The revised brand and marketing strategy is intended to increase consumer recognition of the broad scope of the Company's unique collection of luxury hotels and travel experiences, thereby increasing repeat and 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 more attractive to third-party owners thereby facilitating the strategy of expanding into third-party management of properties that complement Belmond's existing portfolio.

The Company has made important progress on increasing consumer and industry awareness of the Belmond brand in the approximately four years since its launch. Management believes that there is additional scope for expanding awareness and is focused on building the brand and gaining more market share within the luxury leisure brand landscape. In particular, the Company is focused on making Belmond "the brand of choice" for its specific niche by expanding brand training for employees in order to bring the brand to life for guests while on property, identifying and introducing signature programming that differentiates the Company from its competitors, and utilizing public relations and media opportunities to introduce new experiences while at the same time reinforcing the Belmond brand. In 2017, the Company launched a new global brand campaign and fully re-designed consumer website to support and help centralize these collective brand objectives.

Expanding the Company's global footprint -- As part of the strategic plan that the Company unveiled in 2016, Belmond identified global footprint expansion as a meaningful driver of the Company's long-term growth and value. Footprint expansion includes growing the Company's international portfolio through any or all of the following: acquisitions, long-term leases, management agreements -- with or without a related investment, franchise agreements, and construction or acquisition of new train or cruise businesses. Factors in Belmond's evaluation of a potential acquisition, lease, management or franchise opportunity include the property's fit within the Belmond brand and the Company's target geographic markets, as well as an assessment against certain Company's defined financial criteria, with a focus on maintaining conservative debt and leverage levels. In keeping with this conservative approach, the Company intends to partially finance larger acquisitions through the sale of selected assets while generally seeking to retain long-term management of any disposed asset.
 
As a sizeable part of its footprint expansion strategy, the Company plans to pursue long-term contracts to manage distinctive luxury 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

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standards and to align Belmond's interest as an operator with the owner. Management agreements are desirable to the Company in that they would typically be a less-capital-intensive manner of facilitating entry into new markets for Belmond. 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 sold its 50% ownership in the entity which owned Hotel Ritz by Belmond, Madrid, Spain, the Inn at Perry Cabin by Belmond in Maryland, and Belmond Northern Belle in England for combined total proceeds of $87,489,000, and removed any debt or guarantees related to these properties from its consolidated balance sheets. See Note 5 to the Financial Statements. Management continues to review Belmond's portfolio to identify additional non-core assets and expects that any future asset sales would be encumbered by long-term management agreements for Belmond. See Item 7—Management’s Discussion and Analysis of Financial Condition and Results of Operations.

Marketing, Sales and Public Relations
 
Belmond invested $3,000,000 in enhanced promotional and marketing initiatives in 2017.
 
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 global sales force located in 18 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. The belmond.com website was fully rebuilt and re-branded in 2017, in anticipation of the launch of a global brand campaign and to support the business objective to increase bookings and revenues through online commerce. 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, particularly as the brand looks to reach new markets and to target new customer demographics, including millennials.
 
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, customer relationship management systems and other customer recognition programs, worldwide preferred travel agent programs, and direct communications with customers. In 2018, the Company will continue to invest in business intelligence systems to further enhance the effectiveness of its marketing and communication strategy to ensure content is tailored, targeted and personalized in accordance with individual customer preferences.
 
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 portfolio, 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.


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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:

Belmond has continued its association with the Sustainable Restaurant Association. The food and beverage operations of all of Belmond's properties will be assessed in 2018 to measure and benchmark their sustainability credentials. Belmond is the first global luxury hospitality brand to have undertaken this third party testing. This testing will continue to inform Belmond's minimum food sustainability, environmental responsibility and ethical sourcing standards during the coming year.

In London, Belmond received a Certificate of Recognition from Mayor Sadiq Khan for its "exemplary contribution to volunteering" in the city's Team London awards. Activities in 2017 included volunteering with a local learning disabilities team, introducing a reading and math mentoring program for disadvantaged children, and taking part in several local community initiatives that contributed to the London corporate office's neighborhood being awarded a Britain in Bloom award.

In the U.K., Belmond Manoir aux Quat'Saisons supports local community organizations, schools and an animal sanctuary. It is an active member of the Sustainable Restaurant Association and is committed to sourcing local food wherever possible, nuturing and expanding its organic gardens, composting waste, and caring for the environment by, among other things, collecting waste kitchen oils and fats and delivering them to a recyling plant to be converted into biofuel.

In Myanmar, the ship doctor of Belmond Road to Mandalay has run community activities along the Ayeyarwady River in a program dating back to 1995. These include a free clinic that treats an average of 2,000 people per month, with plans to open a new operating theater to be staffed by a volunteer surgeon. Among other community activities are the construction and long-term support of 25 schools, and irrigation and solar power projects in remote villages.

Our many diverse activities in southeast Asia include supporting a turtle conservation foundation, beach cleaning, and water purification and recycling programs in Bali, supporting an orphanage in Laos, and supporting a water conservation project involving dam construction in Koh Samui, Thailand.

In Russia, Belmond Grand Hotel Europe works with local orphanages and youth organizations to support those in need. The hotel supports a house in the SOS children's village outside of St. Petersburg for young people without families, where five children aged between 12 and 15 years old are currently being cared for. The hotel has also introduced a greenhouse program to educate children in growing, and the importance of. fresh organic vegetables.

In the U.S., Belmond Charleston Place created and coordinates 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. The hotel also introduced a "Teach the Need" program, teaching hospitality skills to at-risk high school students and helping them find employment. A new program, "Ben's Friends," helps those in the hospitality industry overcome drug- and alcohol-related problems. In addition, every Christmas, the hotel organizes a luncheon for 2,000 disadvantage local people, along with providing gifts such as winter coats.

Also in the U.S., Belmond El Encanto is pursuing a number of community initiatives such as donating clothing, toys and other items to low-income families and local shelters. In addition, staff participate in charity races and volunteer as stewards. The hotel has sponsored disadvantaged children to travel to an island national park to learn about its ecosystem. The hotel's Sustainability Committee spearheads long-term environmental initiatives, which include water conservation through faucet aerators, laundry reduction, eco cleaning products and the introduction of moisture-resistant plants to its famous gardens.

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, recycles 100% of its plastic bottles, donates retired linen and clothing to local charities, 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 Projeto Carnivoros do Iguaçu, which has overseen a substantial rise in numbers of endangered animals such as pumas and jaguars

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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.
   
Our Peru hotels and trains undertake a wide range of community and sustainability initiatives. These include support of local artisans and farmers who receive help to create products and grow crops that our Peru hotels and trains purchase at fair trade prices. Belmond Palacio Nazarenas has developed an edible herb garden, Belmond Hotel Rio Sagrado a small orchard, and Belmond Sanctuary Lodge a small greenhouse – all of which supply their kitchens. PeruRail supports community alpaca breeding and wool weaving projects and donates blankets to local communities. Additional community programs range from planting thousands of trees to clearing waste from riverbanks and beaches. Cultural initiatives include the provision of free train travel for disadvantaged children to Machu Picchu, community initiatives to improve safety along the train tracks, and a film-making program that records local people sharing local traditions and memories. One particular program, Cconamuro, helps train villagers in hospitality skills, enabling them to welcome our guests on cultural day visits that include lunch and the chance to discover aspects of local life.

Our Italian hotels are active in a range of sustainability and community initiatives. Our two hotels in Sicily have implemented water-saving initiatives including rainwater tanks that help sustain a new Chef's Garden, have joined local children in the annual clean-up of nearby Isola Bella beach, and helped raise funds for a local hospital. Belmond Villa San Michele hosts an annual "dinner in the dark" in support of the Italian Union of the Blind and Partially Sighted, whose students serve guests. In addition, staff from the hotel volunteered with Angeli del Bello, a civic volunteer organization, to clean a public park in Florence. Belmond Hotel Cipriani continued its support of the Senegal village from which its Night Concierge hails. Staff raise funds for the village and also shipped a sea container of mattresses, appliances and other goods no longer needed by the hotel to the village.

In Mexico, Belmond Maroma Resort & Spa plants approximately 850 sapling trees monthly for reforestration, recycles retired clothing and linen to the Red Cross, and takes part in community projects supporting local fauna including melipona bees and sharks.

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. Among the Company's awards in 2017, Belmond Le Manoir aux Quat'Saisons was awarded "Hotel of the Year" and "Rural Hotel of the Year" by Food & Travel magazine, Belmond Eagle Island Lodge won a design award for best creativity, innovation and excellence in the "Lodge & Tented Camps" category at the AHEAD MEA Design Conference, and Belmond Andean Explorer received the award for excellence in hospitality design at the New York City Gold Key Excellence in the Hospitality Design award ceremony. 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 reputation and name recognition, 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, and types of cuisine.
 
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.
 

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Employees
 
Belmond currently employs approximately 9,100 full-time-equivalent persons.  Approximately 6,300 persons are employed in the hotels, 2,700 in the trains and cruises business, and 131 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, development and construction, customer and employee 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 consumer confidence, 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,
 
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,
 

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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, potentially 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 of countries where our hotels and other properties are located, 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.
 
The effects of many of these factors vary among Belmond’s hotels and other properties because of their geographic diversity and the laws and regulations of the particular countries in which these hotels and other properties are located. The global economic downturn in 2008 and 2009 preceded by the shock of terrorist attacks and resulting public concerns about travel safety, continued terrorist attacks, regional conflicts in Iraq, Afghanistan, Ukraine and Crimea, as well as in Thailand, Myanmar and other parts of the world, the threatened flu and Ebola epidemics and the outbreak of the Zika virus, and political instability in Brazil, had and may have, varying adverse effects on Belmond's results of operations. In addition, natural disasters, including weather events, such as Hurricanes Irma and Jose, which impacted both Belmond Cap Juluca on the island of Anguilla in the British West Indies and Belmond La Samanna on St. Martin in the French West Indies, can materially effect the Company's results of operations.
 

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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:
 
reputation and name recognition,

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, and
 
types of cuisine.
 
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 and welfare, health and safety of premises and employees, development and construction, customer and employee data privacy, 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, health and safety of premises, development and construction, and the protection of customers' and employees' personal data. 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 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.

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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 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, which could reduce the Company's ability to compete successfully in those jurisdictions while remaining in compliance with the FCPA, UKBA and local laws. 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,

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,

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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,

labor shortages of qualified trades people or labor disputes,

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 luxury assets, 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, asset disposition or other capital raising opportunities 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. Losses from natural catastrophes may reduce the number of insurance carriers and products in the affected market and can increase insurance premiums for these products.
 
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 damage 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 continues to review its portfolio to identify properties that are non-core to its business and expects any future asset sales would be encumbered by long-term management agreements for Belmond. 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, or encumbered by the long-term management agreements it is seeking.

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 and expends resources each year on their surveillance, registration and protection in an increasing number of jurisdictions. 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 or individual country trademark registrations, 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 Protection Regulation will become law in May 2018, 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. The impact of Brexit (see "Risks Relating to Belmond's Financial Condition and Results of Operations—Economic downturns and disruptions

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in the financial markets could adversely affect Belmond's financial condition and results of operations" below) could increase the Company's regulatory obligations and/or require the Company to amend its processes and controls for the use, transfer and processing of personal data.

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 and business 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 third parties attempt 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, including securities class action lawsuits, 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; decline in Belmond's stock price; 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 24 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 five 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 or regional 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
 
political instability and/or changes in government administrations.

Changing economic, political and regulatory developments in any of the countries in which the Company operates, including in the U.K. in respect of its expected withdrawal from the EU (commonly referred to as "Brexit") and in the U.S. in respect of its evolving trade and immigration policies and the Tax Cut and Jobs Act of 2017, along with the evolving political situation in Ukraine, Brazil and Peru and regional events in Myanmar, could adversely affect the Company's business and results of operations.
 
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.
 
Five 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 and control because Belmond’s partners:
 
may be unable to meet their financial obligations to the joint venture,
 

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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 may 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.

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. In addition, 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 global economic recovery slows or adverse economic conditions recur in any of the jurisdictions in which Belmond conducts business, 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 and the Belmond Grand Hibernian train in Ireland. 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.

On March 29, 2019, the U.K. will cease to be a member of the European Union. Negotiations have commenced between the British Government and the EU to agree the terms of the U.K.'s departure and those to govern its future relationship with the EU member states. Although it is unknown what the final Brexit terms will be, it is possible that there will be increased regulatory complexities and an impact on exchange rates, which may adversely affect our operations and financial results. In addition, while we believe it is too early to assess the full impact on the Company of the U.K.'s decision to leave the EU, a weaker pound or British economy could impact the travel preferences of the Company's guests who originate from the U.K. and could affect the operations and financial results at those properties that have a significant proportion of British visitors, such as Belmond Reid's Palace, Belmond La Residencia, the Italian properties and the Company's U.K. businesses. If as a consequence of Brexit, visas are introduced as a requirement for EU nationals to work in the U.K. (or for U.K. nationals to work in the EU), this could adversely affect the Company's ability to attract and retain high-caliber staff. In the U.S., evolving trade and immigration policies and the U.S. Tax Cuts and Jobs Act of 2017 could adversely affect the Company's business and results of operations.
 
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, 2018, Belmond will have $6,407,000 of scheduled debt repayments including capital lease payments and debt held by consolidated variable interest entities. In 2019, Belmond will have $118,428,000 of scheduled debt repayments including capital lease payments and debt held by consolidated variable interest entities. Belmond’s capital commitments at December 31, 2017 amounted to $19,464,000.
 
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—

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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, dispose of non-core assets 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.
 
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 appears to be a likelihood of potential non-compliance with a covenant, Belmond would as a general rule 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 were to be unable to agree with its lenders as to 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 Amended and Restated Credit Agreement, dated July 3, 2017, between Belmond and its senior secured lenders governing the $703,434,000 credit facility described above (the "Amended and Restated Credit Agreement") contains a consolidated net leverage covenant in respect of the revolving credit facility. Under the Amended and Restated Credit Agreement, the term loan portion of the credit facility is subject to cross-acceleration with the revolving credit facility. Therefore, if the Company were to breach this consolidated net leverage covenant, the entire credit facility could be accelerated and the lenders could foreclose on substantially all of the Company's assets. In addition, the negative covenants in the Amended and Restated Credit Agreement 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.

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, 2017, Belmond’s consolidated long-term indebtedness was $724,230,000 (including the current portion and the long-term indebtedness of Belmond’s consolidated variable interest entities of $112,857,000). 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,
 
limit Belmond’s flexibility in planning for, or reacting to, changes in its business and industry as well as the economy generally, or

limit Belmond's ability to plan for, or advance, its strategic growth plan.
 
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 52% of Belmond’s consolidated long-term debt at December 31, 2017 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 accounting 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. See Note 2 to the Financial Statements.
 
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 financial condition and/or results of operations.
 
As an example of these estimates and judgments, Belmond evaluates goodwill for impairment 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 a goodwill impairment charge in 2017 and the Company continues to monitor goodwill balances for future potential impairment (see Note 9 to the Financial Statements). Belmond’s impairment analysis under U.S. GAAP 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 and political 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 and applicable securities laws. 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 0.5% 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, Harsha Agadi and Mitchell C. Hochberg, are also directors of the Company, consistent 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 46 properties, consisting of 36 highly individual deluxe hotels, 30 of which are owned, four European tourist trains, one cruise ship in Myanmar, 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 five hotels in Peru (including three under long-term lease), its Southeast Asian train and PeruRail (including the Belmond Andean Explorer train in Peru). 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 one property scheduled for future opening, the Belmond Cadogan Hotel in London, England.

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. In September 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 20 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

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Singapore arbitration panel issued its final award in favor of Belmond, holding that the owner had breached Indonesian law and 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 eight separate actions filed by the owner for lack of jurisdiction due to the arbitration clause in the parties’ lease. The owner has appealed five of these decisions, all of which plead variations on the same facts, of which four have been affirmed by the Appellate Court with two of those affirmed by the Indonesian Supreme Court and the other two await a decision by the Indonesian Supreme Court. The fifth case was reversed in favor of the owner on appeal in October 2014 and affirmed by the Indonesian Supreme Court in December 2016. Belmond has sought review for reconsideration by the Supreme Court. In the meantime, Belmond filed with the Central Jakarta District Court in October 2017, as further support for the enforcement of Belmond’s arbitral claim, the decisions of four Indonesian trial courts enforcing the arbitration provision under the lease and ruling that the Indonesian courts had no jurisdiction over the parties’ 2013 dispute, along with four affirming decisions from the appellate courts and the two from the Indonesian Supreme Court.

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.

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. See Notes 5 and 20 to the Financial Statements.

Belmond Hotel das Cataratas

In September 2014, the Brazilian Ministry of Planning, Budget and Management notified the Company that it was denying the Company's application to extend the term or reduce the rent under the lease for Belmond Hotel das Cataratas, which was entered into in 2007. 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.

Prior to August 2014, with the agreement of the Ministry, the Company had been paying the base annual rent without an annual adjustment for inflation as provided for in the lease, pending resolution of Belmond’s application. Throughout this period, the Company had expensed the full rental amount and has fully accrued the difference between the rental charge and the amount actually paid. Based on the Ministry’s decision denying any relief, the Ministry directed the Company that it would henceforth assess rent at the contractual rate, which has been included in the table of future rental payments as at December 31, 2016, and that it was required to pay the difference between the contractual rent and the rent that had been actually paid. On March 20, 2015, the Ministry provided notice to the hotel that an aggregate amount of approximately R$17,000,000 ($5,139,000) was due on March 31, 2015 as a result of its rejection of any relief sought by Belmond.

The Company appealed to the Ministry to reconsider its decision on both procedural and substantive grounds. Pending this requested reconsideration and exhaustion of administrative remedies, the Company did not pay to the Ministry the amount claimed. The Company filed a lawsuit in the Federal Court in Paraná State in August 2016 against the Government of Brazil regarding the Ministry’s failure to properly consider and modify the lease concession for Belmond Hotel das Cataratas. The Federal Court granted the Company’s request for an injunction against the Government enforcing its claim and granted the Company’s request for a 25% preliminary reduction in rent, pending a decision on the merits, which the Superior Court upheld on appeal in a decision rendered in September 2016. The Government appealed to a three-judge panel of the Superior Court, which upheld the decision of the Federal Court in favor of the Company in a judgment rendered in January 2017.
On October 17, 2017, the Federal Court issued a decision on the merits denying in part the Company’s claim for modification of the lease concession. The Court ruled although the lease is an administration agreement rather than a simple commercial lease, the Company had not overcome its burden of proof to show that a modification was justified. The Court further ordered that the Company must pay the stated rent in the lease rather than the reduced rent set by the Federal Court in September 2016. The Court also revoked the injunction issued in September 2016 that had been subsequently affirmed on appeal prohibiting the Federal Government from pursuing a claim against the Company to recover the difference between the stated lease rent and the amounts the Company actually paid during the period from 2009 to 2014. The Company appealed this decision and requested injunctive relief enjoining the Government from enforcing the decision of the Federal Court pending a hearing on the appeal. On December

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22, 2017, the Federal Superior Court denied the Company's request for an injunction and affirmed the lower court's partial decision of the merits. As a result, the Federal Government could seek immediately to enforce its claim for allegedly unpaid lease obligations. The Company has reserved against this claim, and this accrual as at December 31, 2017 totaled R$25,174,000 ($7,610,000). The Company does not believe that any loss above the amounts accrued is likely. The Company intends to vigorously contest the remaining issues in front of the Federal Court, particularly the matter of proving that a modification of the lease concession is warranted under the circumstances.

Belmond Miraflores Park Hotel

The Company is contesting a claim against Belmond Miraflores Park Hotel (“BMP”) by the municipality of Miraflores in Lima, Peru, where BMP is located. The municipality alleges that BMP has generated noise and vibrations in violation of municipal nuisance ordinances resulting in the disturbance of certain apartment owners in an adjoining residential building. The local administrative court ruled in favor of the municipality, and levied a nominal fine and issued an order for injunctive relief that included the potential closure of BMP pending the elimination of the noise and vibrations. In March 2016, after the administrative court’s ruling was affirmed at the trial court and subsequently, the appellate court level, BMP appealed to the Supreme Court of Peru. Enforcement of the ruling of the appellate court has been stayed pending the Supreme Court appeal. On June 29, 2017, the Supreme Court issued a decision accepting BMP’s appeal rather than, as BMP had expected, summarily affirming the appellate court decision. Consequently, BMP expects that the Supreme Court will issue its opinion on this matter in the latter half of 2018. Management believes that the risk of closure of BMP is remote because BMP will have completed its remediation by the time the Supreme Court issues its decision and expects to be in compliance with municipal nuisance ordinances at that time. BMP has other alternatives that it could pursue to resolve this matter if BMP is not compliant by the time of the Supreme Court decision. Accordingly, management does not believe that a material loss is probable and no accrual has been made in respect of this matter.

Cupecoy Village Development N.V. ("Cupecoy")

In July 2015, Cupecoy Village Development N.V. (“Cupecoy”) 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, which Belmond believed indicated a maximum possible loss of $16,500,000. Belmond believed that the report received from the tax authorities contained a number of material miscalculations and misinterpretations of fact and law. The Company had provided a written response to the tax authorities disputing their assessment and expected the resolution of this dispute to result in only an immaterial cost. However, the tax authorities consistently failed to respond or otherwise engage with Belmond or Cupecoy and therefore the Company gave the tax authorities notice that it intended to wind up Cupecoy, which the Company did after receiving no response from the authorities to this notice. In October 2016, following our application to the court, Cupecoy was declared technically insolvent in light of the 2015 tax claim, at which point the Company determined that any liability in respect of Cupecoy was effectively discharged. A final bankruptcy declaration was issued in the first quarter of 2017.

"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 trademark 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 against Belmond’s "Cipriani" Community trademark. To date, Belmond has successfully rebutted this challenge at every level of administrative appeal, including before the EU General Court in Luxembourg which issued a decision on June 29, 2017 dismissing the Arrigo Cipriani appeal and ordering that appellant pay the costs of the court and the Company. Belmond has recently been successful in securing the cancellation in Portugal of a trademark application filed by an affiliated company 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.

In addition, there are a number of ongoing trademark 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 November 2017, the Court rejected the family's complaint and awarded costs to the Company. This decision was not subsequently appealed. 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 its use of the full name (rather than just an initial with the family's surname), would not constitute infringement of the Company’s registered trademark.

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This ruling was overturned on appeal in favor of the Company on November 30, 2017. The Cipriani family has appealed this decision before the Italian Supreme Court, and in a separate filing to the appellate court has requested the reconsideration of that court's decision. While Belmond believes it has a meritorious case, Belmond cannot estimate the range of possible additional loss if it should not prevail in this matter and Belmond has made no accruals in respect of the matter. Separate proceedings brought by Belmond in Spain to defend Belmond’s marks 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.

Belmond Sanctuary Lodge

On November 28, 2017, Peru Belmond Hotels S.A., the Peruvian hotel joint venture in which the Company holds a 50% interest ("PBH"), received notification of a complaint filed with the Court of Cusco by the Regional Government of Cusco seeking the annulment of the ten-year extension of the Belmond Sanctuary Lodge concession that commenced in May 2015. The Regional Government alleges that the President of the Region at the time of the execution of the extension did not have the sole authority to bind the Regional Government. This lawsuit is substantially similar to a complaint filed by the Regional Government against PBH in January 2015 that was dismissed by the Court of Cusco and, upon appeal by the Regional Government, was affirmed by the Superior Court of Cusco in favor of PBH in June 2016. The Company does not believe that there is any merit to the Regional Government's complaint.

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. 

Belmond has granted to James Sherwood, a former director of the Company, a right of first refusal to purchase the Belmond Hotel Cipriani in Venice, Italy in the event Belmond proposes to sell it. The purchase price would be the offered sale price in the case of a cash sale or the fair market value of the hotel, as determined by an independent valuer, in the case of a non-cash sale. Mr. Sherwood has also been granted an option to purchase the hotel at fair market value if a change in control of the Company occurs. Mr. Sherwood may elect to pay 80% of the purchase price if he exercises his right of first refusal, or 100% of the purchase price if he exercises his purchase option, by a non-recourse promissory note secured by the hotel payable in ten equal annual installments with interest at LIBOR. This right of first refusal and purchase option are not assignable and expire one year after Mr. Sherwood’s death. These agreements relating to Belmond Hotel Cipriani between Mr. Sherwood and Belmond and its predecessor companies have been in place since 1983 and were last amended and restated in 2005.


ITEM 4.       Mine Safety Disclosures

None.


33


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 2017 and 2016 as reported for New York Stock Exchange composite transactions:
 
 
 
2017
 
2016
 
 
High
 
Low
 
High
 
Low
First quarter
 
$
14.45

 
$
11.70

 
$
10.04

 
$
7.31

Second quarter
 
13.65

 
11.00

 
10.00

 
8.69

Third quarter
 
13.95

 
12.05

 
12.86

 
9.60

Fourth quarter
 
14.20

 
11.68

 
14.05

 
11.50

 
The Company paid no cash dividends in 2017 and 2016 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 15, 2018, there were 75 record holders of the class A common shares of the Company.
 
During 2017, 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.
 
 
 
 
 
 
 
 
 

34


ITEM 6.       Selected Financial Data

Belmond Ltd. and Subsidiaries
 
 
 
2017
 
2016
 
2015
 
2014
 
2013
 
 
$’000
 
$’000
 
$’000
 
$’000
 
$’000
 
 
 
 
 
 
 
 
 
 
 
Revenue
 
560,999

 
549,824

 
551,385

 
585,715

 
594,081

 
 
 
 
 
 
 
 
 
 
 
Impairments(1)
 
(13,716
)
 
(1,007
)
 
(9,796
)
 
(1,211
)
 
(36,430
)
 
 
 
 
 
 
 
 
 
 
 
(Loss)/gain on disposal of property, plant and equipment and equity method investments(2)
 
(153
)
 
938

 
20,275

 
4,128

 

 
 
 
 
 
 
 
 
 
 
 
(Losses)/earnings from unconsolidated companies, net of tax (3)
 
(10,213
)
 
11,013

 
9,075

 
9,484

 
6,442

 
 
 
 
 
 
 
 
 
 
 
(Losses)/earnings from continuing operations
 
(45,070
)
 
35,401

 
17,388

 
2,047

 
(26,178
)
 
 
 
 
 
 
 
 
 
 
 
Net earnings/(losses) from discontinued operations, net of tax(4)
 
122

 
1,032

 
(1,534
)
 
(3,782
)
 
(5,318
)
 
 
 
 
 
 
 
 
 
 
 
Net (losses)/earnings
 
(44,948
)
 
36,433

 
15,854

 
(1,735
)
 
(31,496
)
 
 
 
 
 
 
 
 
 
 
 
Net (earnings)/losses attributable to non-controlling interests
 
(87
)
 
(109
)
 
411

 
(145
)
 
(63
)
 
 
 
 
 
 
 
 
 
 
 
Net (losses)/earnings attributable to Belmond Ltd.
 
(45,035
)
 
36,324

 
16,265

 
(1,880
)
 
(31,559
)

 
 
2017
 
2016
 
2015
 
2014
 
2013
 
 
$
 
$
 
$
 
$
 
$
 
 
 
 
 
 
 
 
 
 
 
Basic earnings per share:
 
 

 
 

 
 
 
 

 
 

(Losses)/earnings from continuing operations
 
(0.44
)
 
0.35

 
0.17

 
0.02

 
(0.25
)
Net earnings/(losses) from discontinued operations
 

 
0.01

 
(0.01
)
 
(0.04
)
 
(0.05
)
Basic net (losses)/earnings per share attributable to Belmond Ltd.
 
(0.44
)
 
0.36

 
0.16

 
(0.02
)
 
(0.31
)
 
 
 
 
 
 
 
 
 
 
 
Diluted earnings per share:
 
 

 
 

 
 

 
 

 
 

(Losses)/earnings from continuing operations
 
(0.44
)
 
0.34

 
0.17

 
0.02

 
(0.25
)
Net earnings/(losses) from discontinued operations
 

 
0.01

 
(0.01
)
 
(0.04
)
 
(0.05
)
Diluted net (losses)/earnings per share attributable to Belmond Ltd.
 
(0.44
)
 
0.35

 
0.16

 
(0.02
)
 
(0.31
)
 
 
 
 
 
 
 
 
 
 
 
Dividends per share
 

 

 

 

 

 

35


 
 
2017
 
2016
 
2015
 
2014
 
2013
 
 
$’000
 
$’000
 
$’000
 
$’000
 
$’000
 
 
 
 
 
 
 
 
 
 
 
Total assets
 
1,653,637

 
1,524,068

 
1,509,475

 
1,655,223

 
1,879,866

 
 
 
 
 
 
 
 
 
 
 
Total long-term debt and obligations under capital leases
 
707,159

 
591,052

 
582,892

 
604,689

 
628,651

 
 
 
 
 
 
 
 
 
 
 
Total shareholders’ equity
 
698,546

 
686,450

 
658,064

 
761,186

 
908,222

 
 
 
 
 
The above selected financial data should be read in conjunction with the information set forth under Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations and the consolidated financial statements and related notes (Item 8).

(1)
The impairment in 2017 consisted of impairment of property, plant and equipment of $7,124,000 at Belmond Road to Mandalay and $1,092,000 at Belmond Northern Belle and impairment of goodwill of $5,500,000 at Belmond Cap Juluca.

The impairment in 2016 consisted of impairment of property, plant and equipment of $1,007,000 at Belmond Orcaella.

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 were held in Australia and were 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.

(2)
The 2017 loss was related to the sale of the shares in Northern Belle Limited offset by the recognition of the deferred gain in relation to the sale of Inn at Perry Cabin by Belmond in March 2014.

The 2016 gain was related to the gain on sale of the spa building at Belmond Casa de Sierra Nevada and the recognition of the deferred gain in relation to the sale of Inn at Perry Cabin by Belmond in March 2014.
    
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.

(3)
The 2017 losses from unconsolidated companies, net of tax, include an impairment charge of $29.3 million recorded in Ferrocarril Transandino S.A. ("FTSA"), the Company's joint venture that has a concession from the Government of Peru to operate the track network in the southern and southeastern Peru.

(4)
The results of Ubud Hanging Gardens, Porto Cupecoy, The Westcliff and Keswick Hall have been presented as discontinued operations for all periods presented.

Included in the earnings/(losses) from discontinued operations in 2013 are impairment losses of $7,031,000 related to Ubud Hanging Gardens and the gain on sale of Porto Cupecoy of $439,000.

36


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

Introduction
 
Belmond currently owns, partially-owns or manages 46 properties (excluding one additional business scheduled for a future opening, the Belmond Cadogan Hotel in London, England).

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

Belmond revised the order of the presentation of these segments in the year ended December 31, 2016 and included a new sub-total to show management fees earned by the Company from its part-owned/managed operations. In addition, Belmond reclassified certain expenses associated with the Company’s development team from the Part-owned/managed hotels segment to central costs. Prior periods have been re-presented to reflect the current period presentation. There has not been a material impact on the consolidated financial statements.

Hotels represent the largest part of Belmond’s business with the vast majority of the Company's revenues in 2017 , 2016 and 2015, respectively, derived primarily from the Europe, North America and Rest of world segments.

Hotels consists of 30 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. Twelve of the owned hotels are located in Europe, six in North America and twelve 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. In May 2017, the Company acquired Cap Juluca, now rebranded as Belmond Cap Juluca, a 96-key resort on the Caribbean island of Anguilla, British West Indies. In February 2018, the Company acquired the Castello di Casole resort and estate in Tuscany, Italy. See Notes 4 and 26 to the Financial Statements.

Belmond's part-owned/managed segment consists of six hotels which Belmond operates under management contracts in Peru and the United States. Belmond has unconsolidated equity interests in five of the managed hotels. In April 2017, the Company acquired Las Casitas del Colca, a 20-key hotel in Colca Canyon, Peru, through Peru Belmond Hotels ("PBH").

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 was reported within gain on disposal of property, plant and equipment and equity method investments in the statements of consolidated operations in the relevant periods.
 
Belmond's owned trains and cruises segment consists of four European tourist trains, one river cruise ship in Myanmar and one French canal cruise business. In August 2016, the Company commenced the operations of Belmond Grand Hibernian, the first luxury overnight train traveling throughout the island of Ireland. On November 2, 2017, Belmond sold its interest in the entity that wholly owned Belmond Northern Belle and on November 6, 2017, the entity that leased Belmond Orcaella provided notice of termination to the owner in respect of its charter agreement.

Belmond's part-owned/ managed trains segment consists of three train businesses in Southeast Asia and Peru which Belmond operates under management contracts. Belmond has unconsolidated equity interests in each of these train businesses. In May 2017, the Company launched, through PBH, the Belmond Andean Explorer luxury sleeper train, located in Peru.
 
Hotel RevPAR, ADR and occupancy

Revenue per available room (“RevPAR”) is calculated by dividing room revenue by room nights available for the period. 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 refurbishment where a property is closed for a month or longer. The comparison also excludes the effect of dispositions (including discontinued operations) or closures. Management uses RevPAR and same store RevPAR to identify trend information with respect to room revenue and to evaluate the performance of a specific hotel or group of hotels in a given period.  
 
Average daily rate ("ADR") is calculated by dividing room revenue by total rooms sold for the period. Management uses ADR to measure the level of pricing achieved by a specific hotel or group of hotels in a given period.

37


 
Occupancy is calculated by dividing total rooms sold by total rooms available for the period. Occupancy measures the utilization of a hotel’s available capacity. Management uses occupancy to measure demand at a specific hotel or group of hotels in a given period.

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 2017, same store RevPAR increased by 5% in U.S. dollars and 1% in constant currency. Average occupancy was 61% and ADR was $510. In 2016, same store RevPAR increased by 1% in U.S. dollars and 3% when measured in constant currency. Average occupancy was 61% and ADR was $490.

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.
 
Impact of foreign currency exchange rate movements
 
As reported below in the comparisons of the 2017, 2016 and 2015 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. Twelve of Belmond’s owned properties in 2017 operated in European euro territories, two in Brazilian real, one in South African rand, four 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 derived by Venice Simplon-Orient-Express was recorded primarily in British pounds sterling, but its operating costs 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, European euros and Peruvian nuevo soles, respectively. Both revenue and the majority of expenses for Belmond Cap Juluca, Belmond Governor's Residence, Belmond La Résidence D'Angkor and Belmond Road to Mandalay were recorded in U.S. dollars.


38


Except for the specific instances described above, Belmond’s properties match foreign currency earnings and costs as far as possible 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 increased during 2017 to $12.25 at December 31, 2017, from $13.35 at December 31, 2016 and Belmond’s market capitalization decreased to $1.25 billion at December 31, 2017, from $1.36 billion at December 31, 2016.

Results of Operations

Operating information for Belmond’s owned hotels for the years ended December 31, 2017, 2016 and 2015 is as follows:
 
Year ended December 31,
 
2017
 
2016
 
2015
 
 
 
 
 
 
 
Rooms Available
 
 
 
 
 
 
Europe
 
273,756

 
271,963

 
273,052

North America
 
255,862

 
256,726

 
255,216

Rest of world
 
374,478

 
376,952

 
371,207

Worldwide
 
904,096

 
905,641

 
899,475

 
 
 
 
 
 
 
Rooms Sold
 
 

 
 

 
 
Europe
 
176,129

 
175,060

 
169,371

North America
 
171,906

 
171,392

 
171,828

Rest of world
 
200,537

 
204,944

 
211,059

Worldwide
 
548,572

 
551,396

 
552,258

 
 
 
 
 
 
 
Occupancy (percentage)
 
 
 
 
 
 
Europe
 
64

 
64

 
62

North America
 
67

 
67

 
67

Rest of world
 
54

 
54

 
57

Worldwide
 
61

 
61

 
61

 
 
 
 
 
 
 
Average daily rate (in U.S. dollars)
 
 

 
 

 
 
Europe
 
740

 
676

 
689

North America
 
426

 
421

 
429

Rest of world
 
380

 
388

 
356

Worldwide
 
510

 
490

 
481

 
 
 
 
 
 
 
RevPAR (in U.S. dollars)
 
 

 
 

 
 
Europe
 
476

 
435

 
427

North America
 
286

 
281

 
289

Rest of world
 
203

 
211

 
202

Worldwide
 
309

 
298

 
295

 

39


2017 compared to 2016
 
 
 
 
 
 
Change %
Year ended December 31,
 
2017
 
2016
 
Dollars
 
Constant currency
 
 
 
 
 
 
 
 
 
Same Store RevPAR (in U.S. dollars)
 
 

 
 

 
 

 
 

Europe
 
476

 
435

 
9
 %
 
6
 %
North America
 
272

 
254

 
7
 %
 
7
 %
Rest of world
 
207

 
218

 
(5
)%
 
(11
)%
Worldwide
 
311

 
297

 
5
 %
 
1
 %

Same store RevPAR data for 2017 and 2016 excludes the operations of Belmond Cap Juluca, which was acquired in May 2017 and Belmond La Samanna, St Martin, French West Indies which is closed for refurbishment following Hurricanes Irma and Jose in September 2017. Both of these operations are included in the North America segment. It also excludes the operations of Belmond Savute Elephant Lodge, Chobe Reserve, Botswana, which closed for refurbishment in November 2017 and Belmond La Résidence d’Angkor, Siem Riep, Cambodia, which closed for refurbishment in May 2016 and re-opened in November 2016. Both of these operations are included in the Rest of world segment.

 
2016 compared to 2015
 
 
 
 
 
 
Change %
Year ended December 31,
 
2016
 
2015
 
Dollars
 
Constant currency
 
 
 
 
 
 
 
 
 
Same Store RevPAR (in U.S. dollars)
 
 

 
 

 
 

 
 

Europe
 
435

 
427

 
2
 %
 
4
 %
North America
 
281

 
289

 
(3
)%
 
(2
)%
Rest of world
 
216

 
207

 
4
 %
 
9
 %
Worldwide
 
303

 
299

 
1
 %
 
3
 %
 
Same store RevPAR data for 2016 and 2015 exclude the operations of Belmond Eagle Island Lodge, Okavango Delta, Botswana, which was closed for refurbishment from January through November 2015, and Belmond La Residence d'Angkor, which closed for refurbishment in May 2016 and re-opened in November 2016. Both of these operations are included in the Rest of world segment.

 
 
 
 
 
 
 
 

40


Revenue 
 
 
2017
 
2016
 
2015
Year ended December 31,
 
$ millions
 
$ millions
 
$ millions
 
 
 

 
 

 
 
Revenue:
 
 
 
 
 
 
Owned hotels:
 
 
 
 
 
 
Europe
 
212.4

 
199.1

 
200.0

North America
 
149.3

 
145.9

 
148.1

Rest of world
 
124.2

 
130.3

 
124.4

Total owned hotels
 
485.9

 
475.3

 
472.5

Owned trains & cruises
 
63.2

 
59.3

 
65.5

 
 
 
 
 
 
 
Part-owned/managed hotels
 
1.0

 
4.4

 
5.2

Part-owned/managed trains
 
10.9

 
10.8

 
8.2

Total management fees
 
11.9

 
15.2

 
13.4

 
 
 
 
 
 
 
Revenue
 
561.0

 
549.8

 
551.4


2017 compared to 2016

Revenue was $561.0 million for the year ended December 31, 2017, an increase of $11.2 million or 2%, from $549.8 million for the year ended December 31, 2016. In constant currency, revenue for the year ended December 31, 2017 decreased $0.6 million from the year ended December 31, 2016. Owned hotels revenue was $485.9 million for the year ended December 31, 2017, an increase of $10.6 million, or 2%, from $475.3 million for the year ended December 31, 2016. In constant currency, revenue for owned hotels for the year ended December 31, 2017 decreased $3.6 million or 1% from the year ended December 31, 2016. The decrease in owned hotels revenue was primarily due to a $20.4 million or 28% decrease in revenue for the Company's two Brazilian properties due to a combination of the impact in the year ended December 31, 2017 of political and economic instability in the country and exceptionally high revenue in the year ended December 31, 2016 due to the 2016 Summer Olympic Games held in Rio de Janeiro. This was offset in part by a $2.8 million or 8% revenue increase at Belmond Hotel Cipriani, Venice, Italy and and a $2.6 million or 10% revenue increase at Belmond Grand Hotel Europe, St. Petersburg, Russia. Additionally, Belmond Charleston Place, Charleston, South Carolina saw revenue growth of $6.0 million or 8% and Belmond Mount Nelson Hotel, Cape Town, South Africa increased revenue by $3.2 million or 18%. Belmond Hotel Cipriani benefited from the Biennale Arts Festival which takes place every other year in Venice, and Belmond Grand Hotel Europe's year-over-year growth was primarily due to increased revenue during the annual St. Petersburg International Economic Forum and the 2017 FIFA Confederations Cup. Belmond Charleston Place increased food and beverage revenue as a result of a new high-end sports pub that commenced operations in July 2016 and also an increase in group business. Belmond Mount Nelson Hotel increased occupancy and average room rate following refurbishment of the property that took place in 2016 and 2017. Revenue from owned trains and cruises was $63.2 million for the year ended December 31, 2017, an increase of $3.9 million, or 7%, from $59.3 million for the year ended December 31, 2016. In constant currency, revenue for owned trains and cruises for the year ended December 31, 2017 increased $6.2 million or 11% from the year ended December 31, 2016 due to a revenue increase of $4.0 million for Belmond Grand Hibernian, Ireland, as it commenced its first full year of operations and the Belmond Royal Scotsman train which grew revenue by $2.2 million or 39% as a result of generating higher-revenue charter business and the addition of a spa car and four new berths. Additionally, the Venice Simplon-Orient-Express train saw revenue increases of $2.0 million driven by promotional activity surrounding the release of the Hollywood movie 'Murder on the Orient Express' and Belmond British Pullman, London, England saw revenue increase by $1.4 million due to a higher number of charters operated in the year ended December 31, 2017. This was offset by a combined revenue decrease of $3.4 million at Belmond Road to Mandalay and Belmond Orcaella, the Company's two river cruise ships in Myanmar, as a result of decreased demand for tourism.

    

41


2016 compared to 2015

Revenue was $549.8 million for the year ended December 31, 2016, a decrease of $1.6 million, from $551.4 million for the year ended December 31, 2015. In constant currency, revenue for the year ended December 31, 2016 increased $15.0 million or 3% from the year ended December 31, 2015. Owned hotels revenue was $475.3 million for the year ended December 31, 2016, an increase of $2.8 million, or 1%, from $472.5 million for the year ended December 31, 2015. In constant currency, revenue for owned hotels for the year ended December 31, 2016 increased $13.5 million or 3% from the year ended December 31, 2015. The increase in owned hotels revenue was largely due to a revenue increase of $6.9 million at Belmond Copacabana Palace, Rio de Janeiro, Brazil due to the 2016 Summer Olympic Games that took place in Rio de Janeiro and a revenue increase of $3.4 million in Belmond Safaris, Botswana, following the reopening of Belmond Eagle Island Lodge, which was closed from January to November 2015 for a complete renovation. In addition, Belmond Reid's Palace, Madeira, Portugal increased revenue by $2.5 million due to a 18% increase in occupancy, which largely resulted from the Company's strategic decision to focus on driving wholesale business in order to gain market share during the destination's slow season. Revenue from owned trains and cruises was $59.3 million in the year ended December 31, 2016, a decrease of $6.2 million, or 9%, from $65.5 million in the year ended December 31, 2015. In constant currency, revenue for owned trains and cruises for the year ended December 31, 2016 decreased $0.3 million or 1% from the year ended December 31, 2015, primarily as a result of revenue declines at the Company's two river cruise ships in Myanmar and Belmond Northern Belle, offset in part by Belmond Grand Hibernian as it commenced operations in August 2016.







42


Segment performance

Segment performance is evaluated by the chief operating decision maker based upon adjusted EBITDA, which excludes gains/(losses) on disposal, impairments, restructuring and other special items, interest income, interest expense, foreign currency, tax (including tax on earnings from unconsolidated companies), depreciation and amortization and gains/(losses) on extinguishment of debt. Segment performance for the years 2017, 2016 and 2015 is analyzed as follows:
 
 
2017
 
2016
 
2015
Year ended December 31,
 
$ millions
 
$ millions
 
$ millions
 
 
 
 
 
 
 
Adjusted EBITDA:
 
 
 
 
 
 
Owned hotels:
 
 
 
 
 
 
Europe
 
73.7

 
67.6

 
66.4

North America
 
29.8

 
29.4

 
31.8

Rest of world
 
24.5

 
33.1

 
31.3

Total owned hotels
 
128.0

 
130.1

 
129.5

Owned trains and cruises
 
4.4

 
4.3

 
7.2

 
 
 
 
 
 
 
Part-owned/managed hotels
 
6.8

 
6.3

 
7.1

Part-owned/managed trains
 
24.0

 
25.9

 
19.8

Total adjusted share of earnings from unconsolidated companies and management fees
 
30.8

 
32.2

 
26.9

 
 
 
 
 
 
 
Unallocated corporate costs:
 
 
 
 
 
 
Central costs
 
(33.4
)
 
(30.8
)
 
(34.4
)
Share-based compensation
 
(5.8
)
 
(7.6
)
 
(9.7
)
 
 
 
 
 
 
 
Adjusted EBITDA
 
124.0

 
128.2

 
119.5

 
 
 
 
 
 
 
Reconciliation from (losses)/earnings from continuing operations to adjusted EBITDA:
 
 
 
 
 
 
(Losses)/earnings from continuing operations
 
(45.1
)
 
35.4

 
17.4

Depreciation and amortization
 
62.9

 
52.4

 
50.5

Gain on extinguishment of debt
 

 
(1.2
)
 

Interest income
 
(1.1
)
 
(0.9
)
 
(0.9
)
Interest expense
 
32.5

 
29.2

 
32.1

Foreign currency, net
 
3.0

 
(9.2
)
 
5.0

Provision for income taxes
 
6.6

 
16.4

 
17.0

Share of (benefit from)/provision for income taxes of unconsolidated companies
 
(4.5
)
 
5.7

 
1.5

 
 
54.3

 
127.7

 
122.6

Restructuring and other special items (1)
 
11.7

 
0.4

 
7.4

Acquisition-related costs (2)
 
14.0

 

 

Loss/(gain) on disposal of property, plant and equipment
 
0.2

 
(0.9
)
 
(20.3
)
Impairment of goodwill and property, plant and equipment
 
13.7

 
1.0

 
9.8

Impairment of assets in unconsolidated companies
 
30.1

 

 

 
 
 
 
 
 
 
Adjusted EBITDA
 
124.0

 
128.2

 
119.5

 
 
 
 
 
 
 
(1) Represents adjustments for insurance deductibles and losses while Belmond Cap Juluca and Belmond La Samanna are closed following the impact of Hurricanes Irma and Jose, restructuring, severance and redundancy costs, pre-opening costs and other items, net. 
(2) Represents professional fees incurred in preliminary design and planning, structuring, assessment of financing opportunities, legal, tax, accounting and engineering due diligence and the negotiation of the purchase and sale agreements, and other ancillary documents, with the principal owner and leaseholder, together with three owners of villas and separate subleases, as well as a memorandum of understanding and ground lease with the Government of Anguilla.



43




Owned hotels - Europe
Year ended December 31,
 
2017
 
2016
 
2015
 
 
 
 
 
 
 
Rooms Available
 
273,756

 
271,963

 
273,052

Rooms Sold
 
176,129

 
175,060

 
169,371

Occupancy (percentage)
 
64

 
64

 
62

Average daily rate (in U.S. dollars)
 
740

 
676

 
689

RevPAR (in U.S. dollars)
 
476

 
435

 
427

 
 
 
 
 
 
Change %
Year ended December 31,
 
2017
 
2016
 
Dollars
 
Constant currency
 
 
 
 
 
 
 
 
 
Same Store RevPAR (in U.S. dollars)
 
476

 
435

 
9
%
 
6
%
 
 
 
 
 
 
Change %
Year ended December 31,
 
2016
 
2015
 
Dollars
 
Constant currency
 
 
 
 
 
 
 
 
 
Same Store RevPAR (in U.S. dollars)
 
435

 
427

 
2
%
 
4
%

2017 compared to 2016

Revenue was $212.4 million for the year ended December 31, 2017, an increase of $13.3 million, or 7%, from $199.1 million for the year ended December 31, 2016. In constant currency, revenue for the region for the year ended December 31, 2017 increased $8.1 million, or 4%, primarily due to a $5.6 million or 5% revenue increase for the Company's Italian hotels and a $2.6 million or 10% increase at Belmond Grand Hotel Europe. Revenue growth for the Company's Italian hotels was largely driven by the performance of Belmond Hotel Cipriani which benefited from the Biennale Arts Festival, which takes place every other year in Venice, and Belmond Hotel Splendido, which saw an increase in rates year-over-year following the addition of balconies to twelve of its rooms in March 2017. At Belmond Grand Hotel Europe, revenue increased during the annual St. Petersburg International Economic Forum and the 2017 FIFA Confederations Cup. ADR in U.S. dollar terms for the European owned hotels segment increased to $740 in the year ended December 31, 2017 from $676 in the year ended December 31, 2016. Occupancy remained flat at 64% in the years ended December 31, 2017 and 2016. Same store RevPAR increased by 9% in U.S. dollars, to $476 in the year ended December 31, 2017 from $435 in the year ended December 31, 2016, an increase of 6% on a constant currency basis.

Adjusted EBITDA for the region for the year ended December 31, 2017 of $73.7 million represented an increase of $6.1 million, or 9%, from adjusted EBITDA of $67.6 million for the year ended December 31, 2016. In constant currency, adjusted EBITDA for the region for the year ended December 31, 2017 increased $4.4 million or 6% from the year ended December 31, 2016 primarily due to increases in adjusted EBITDA of $2.2 million or 32% at Belmond Grand Hotel Europe and $1.2 million or 11% at Belmond Hotel Cipriani. As a percentage of European owned hotels revenue, adjusted EBITDA was 35% for the year ended December 31, 2017 compared to 34% for the year ended December 31, 2016.

2016 compared to 2015

Revenue was $199.1 million for the year ended December 31, 2016, a decrease of $0.9 million from $200.0 million for the year ended December 31, 2015. In constant currency, revenue for the region for the year ended December 31, 2016 increased $4.2 million or 2% from the year ended December 31, 2015, primarily due to an increase in revenue of $2.5 million or 15% at Belmond Reid's Palace as a result of the Company's strategic decision to focus on driving wholesale business in order to gain market share during the destination's slow season, resulting in an 18% increase in occupancy. Revenue for the Italian hotels excluding Belmond Hotel Cipriani for the year ended December 31, 2016 was up $3.2 million compared to the year ended December 31, 2015, mainly as a result of leveraging strong demand to drive higher rates. In addition, revenue at Belmond Grand Hotel Europe and Belmond La Residencia, Mallorca, Spain increased $1.5 million and $1.3 million respectively. This was offset by a revenue decrease of $4.8 million or 13% at Belmond Hotel Cipriani due to a challenging comparative period in 2015, when the hotel benefited from the Biennale Arts Festival and the World Expo 2015 in Milan, both of which generated increased visitation to Venice. ADR in U.S. dollar terms for the European owned hotels segment decreased to $676 in the year ended December 31, 2016 from $689 in

44


the year ended December 31, 2015. Occupancy increased to 64% in the year ended December 31, 2016 from 62% in the year ended December 31, 2015. Same store RevPAR increased by 2% in U.S. dollars, to $435 in the year ended December 31, 2016 from $427 in the year ended December 31, 2015.

Adjusted EBITDA for the region for the year ended December 31, 2016 of $67.6 million represented an increase of $1.2 million, or 2%, from adjusted EBITDA of $66.4 million for the year ended December 31, 2015. In constant currency, adjusted EBITDA for the region for the year ended December 31, 2016 increased $2.6 million or 4% from the from the year ended December 31, 2015 mainly due to a $1.6 million or 37% increase in adjusted EBITDA at Belmond Reid's Palace and a $1.1 million or 25% increase in adjusted EBITDA at Belmond La Residencia. As a percentage of European owned hotels revenue, adjusted EBITDA increased slightly to 34% for the year ended December 31, 2016 compared to 33% for the year ended December 31, 2015.

Owned hotels - North America 
Year ended December 31,
 
2017
 
2016
 
2015
 
 
 
 
 
 
 
Rooms Available
 
255,862

 
256,726

 
255,216

Rooms Sold
 
171,906

 
171,392

 
171,828

Occupancy (percentage)
 
67

 
67

 
67

Average daily rate (in U.S. dollars)
 
426

 
421

 
429

RevPAR (in U.S. dollars)
 
286

 
281

 
289


 
 
 
 
 
 
Change %
Year ended December 31,
 
2017
 
2016
 
Dollars
 
Constant currency
 
 
 
 
 
 
 
 
 
Same Store RevPAR (in U.S. dollars)
 
272

 
254

 
7
%
 
7
%
 
 
 
 
 
 
Change %
Year ended December 31,
 
2016
 
2015
 
Dollars
 
Constant currency
 
 
 
 
 
 
 
 
 
Same Store RevPAR (in U.S. dollars)
 
281

 
289

 
(3
)%
 
(2
)%
 
2017 compared to 2016

Revenue was $149.3 million for the year ended December 31, 2017, an increase of $3.4 million, or 2%, from $145.9 million for the year ended December 31, 2016. In constant currency, revenue for the region for the year ended December 31, 2017 increased $3.4 million or 2% from the year ended December 31, 2016, primarily due to revenue growth of $6.0 million or 8% at Belmond Charleston Place, where food and beverage revenue increased as a result of a new sports bar that commenced operations in July 2016 and an increase in group business. Additionally, the newly acquired Belmond Cap Juluca contributed $2.4 million in revenue prior to its closure for renovation at the end of August 2017 and '21' Club by Belmond, New York saw a $1.5 million or 9% increase in revenue in response to marketing campaigns and property improvements in 2017. Growth for these properties was offset by a $7.6 million or 32% decrease in revenue at Belmond La Samanna, which was negatively impacted by a decline in visitation and subsequent closure for refurbishment following the impact of Hurricanes Irma and Jose in September 2017. ADR for the North American owned hotels segment increased to $426 in the year ended December 31, 2017 from $421 in the year ended December 31, 2016. Occupancy remained flat at 67% in the years ended December 31, 2017 and 2016. Same store RevPAR (which excludes the operations of Belmond Cap Juluca and Belmond La Samanna) increased by 7% to $272 in the year ended December 31, 2017 from $254 in the year ended December 31, 2016.


45


Adjusted EBITDA for the region for the year ended December 31, 2017 of $29.8 million represented an increase of $0.4 million, or 1%, from $29.4 million for the year ended December 31, 2016. In constant currency, adjusted EBITDA for the region for the year ended December 31, 2017 increased $0.4 million or 1% from the year ended December 31, 2016, primarily as a result of a $2.9 million or 13% increase in adjusted EBITDA at Belmond Charleston Place offset by a $1.1 million decrease in adjusted EBITDA at Belmond El Encanto, Santa Barbara, California. Belmond El Encanto saw a decrease in adjusted EBITDA following the closure of the hotel for nearly three weeks during the Thomas Fire in Santa Barbara in December 2017. Operating losses of $1.4 million at Belmond La Samanna and $2.4 million at Belmond Cap Juluca have been added back to adjusted EBITDA while the properties are closed for renovation following the hurricanes. As a percentage of revenue, adjusted EBITDA remained 20% for the year ended December 31, 2017 and the year ended December 31, 2016.

2016 compared to 2015

Revenue was $145.9 million for the year ended December 31, 2016, a decrease of $2.2 million, or 1%, from $148.1 million for the year ended December 31, 2015. In constant currency, revenue for the region for the year ended December 31, 2016 decreased $1.8 million or 1% from the year ended December 31, 2015. This decrease was largely attributable to a $1.9 million revenue decline at Belmond Maroma Resort & Spa and a $1.2 million decline in revenue at ‘21’ Club by Belmond. Belmond Maroma Resort & Spa was impacted by increased local competition and the re-opening of renovated hotels in the Los Cabos resort area of Mexico. ‘21’ Club by Belmond was negatively impacted by both uncertainty in the financial markets due to a significant portion of its clientele having a tie to the financial services sector and disruption caused by construction noise from neighboring buildings. This decrease was partially offset by a $1.6 million revenue increase at Belmond Charleston Place. The hotel increased food and beverage revenue largely as a result of a new sports bar that commenced operations in July 2016 and also continued to benefit from improved room product following the Company's three-year rooms renovation project that was completed in December 2015. ADR for the North American owned hotels segment decreased to $421 in the year ended December 31, 2016 from $429 in the year ended December 31, 2015. Occupancy remained flat at 67% in the years ended December 31, 2016 and 2015. Same store RevPAR decreased by 3% to $281 in the year ended December 31, 2016 from $289 in the year ended December 31, 2015.

 Adjusted EBITDA for the region for the year ended December 31, 2016 of $29.4 million represented a decrease of $2.4 million, or 8%, from $31.8 million for the year ended December 31, 2015. In constant currency, adjusted EBITDA for the region for the year ended December 31, 2016 decreased $2.4 million or 8% from the year ended December 31, 2015 primarily as a result of a $0.6 million or 14% decrease in adjusted EBITDA at Belmond Maroma Resort & Spa, a $0.7 million decrease in adjusted EBITDA at Belmond La Samanna due to reduced visitation and a $0.7 million or 31% decrease in adjusted EBITDA at '21' Club by Belmond. As a percentage of North American owned hotels revenue, adjusted EBITDA decreased to 20% for the year ended December 31, 2016 from 21% for the year ended December 31, 2015.

Owned hotels - Rest of world 
Year ended December 31,
 
2017
 
2016
 
2015
 
 
 
 
 
 
 
Rooms Available
 
374,478

 
376,952

 
371,207

Rooms Sold
 
200,537

 
204,944

 
211,059

Occupancy (percentage)
 
54

 
54

 
57

Average daily rate (in U.S. dollars)
 
380

 
388

 
356

RevPAR (in U.S. dollars)
 
203

 
211

 
202

 
 
 
 
 
 
Change %
Year ended December 31,
 
2017
 
2016
 
Dollars
 
Constant currency
 
 
 
 
 
 
 
 
 
Same Store RevPAR (in U.S. dollars)
 
207

 
218

 
(5
)%
 
(11
)%
 
 
 
 
 
 
Change %
Year ended December 31,
 
2016
 
2015
 
Dollars
 
Constant currency
 
 
 
 
 
 
 
 
 
Same Store RevPAR (in U.S. dollars)
 
216

 
207

 
4
%
 
9
%


46


2017 compared to 2016

Revenue was $124.2 million for the year ended December 31, 2017, a decrease of $6.1 million, or 5%, from $130.3 million in the year ended December 31, 2016. In constant currency, revenue for the year ended December 31, 2017 decreased $15.1 million or 11% from the year ended December 31, 2016 primarily due to a $20.4 million or 28% decrease in revenue for the Company's two Brazilian properties due to a combination of the impact in the year ended December 31, 2017 of political and economic instability in the country and exceptionally high revenue in the year ended December 31, 2016 due to the 2016 Summer Olympic Games held in Rio de Janeiro. Partially offsetting this decrease was revenue growth of $3.2 million or 18% at Belmond Mount Nelson Hotel, $1.6 million or 20% at Belmond Safaris, and $1.4 million or 49% at Belmond La Résidence d'Angkor, Siem Riep, Cambodia, all of which have benefited from the Company's project capital expenditure in recent years. Belmond La Résidence d'Angkor also saw high revenue growth compared to 2016 when it was closed for refurbishment from May to November. ADR in U.S. dollar terms for the Rest of world segment decreased by 2% to $380 for the year ended December 31, 2017 from $388 in the year ended December 31, 2016. Occupancy remained flat at 54% in the years ended December 31, 2017 and 2016. Same store RevPAR in U.S. dollars (which excludes Belmond Savute Elephant Lodge and Belmond La Résidence d'Angkor) decreased by 5% to $207 for the year ended December 31, 2017 from $218 in the year ended December 31, 2016, a decrease of 11% on a constant currency basis.

Adjusted EBITDA for the region for the year ended December 31, 2017 of $24.5 million represented a decrease of $8.6 million, or 26%, from $33.1 million for the year ended December 31, 2016. In constant currency, adjusted EBITDA for the region decreased $11.1 million or 31% from the year ended December 31, 2016, largely as a result of a combined $13.2 million adjusted EBITDA decrease for the Company's two Brazilian hotels, offset by increases in adjusted EBITDA of $2.0 million or 29% at Belmond Mount Nelson Hotel, $1.1 million or 85% at Belmond Safaris and $0.6 million at Belmond La Résidence d'Angkor. As a percentage of Rest of world owned hotels revenue, adjusted EBITDA was 20% for the year ended December 31, 2017 compared to 25% for the year ended December 31, 2016.

2016 compared to 2015

Revenue was $130.3 million for the year ended December 31, 2016, an increase of $5.9 million, or 5%, from $124.4 million for the year ended December 31, 2015. In constant currency, revenue for the year ended December 31, 2016 increased $11.2 million or 9% from the year ended December 31, 2015, primarily due to revenue growth of $6.9 million or 15% at Belmond Copacabana Palace and revenue growth of $3.4 million or 80% at Belmond Safaris. At Belmond Copacabana Palace, the Company successfully capitalized on the 2016 Summer Olympic Games, driving year-over-year ADR and food and beverage revenue growth. Belmond Safaris benefited from being fully operational in 2016, as Belmond Eagle Island Lodge re-opened in December 2015 having been closed from January to November 2015 for a complete renovation. This was partially offset by a revenue decrease of $1.6 million at Belmond La Résidence d'Angkor, which was closed for refurbishment in May 2016 and re-opened in November 2016. ADR in U.S. dollar terms for the Rest of world segment increased by 9% to $388 for the year ended December 31, 2016 from $356 in the year ended December 31, 2015. Occupancy decreased to 54% in the year ended December 31, 2016 from 57% in the year ended December 31, 2015. Same store RevPAR (which excludes Belmond Eagle Island Lodge and Belmond La Résidence d'Angkor) increased by 4% to $216 in the year ended December 31, 2016 from $207 in the year ended December 31, 2015, an increase of 9% on a constant currency basis.

Adjusted EBITDA for the region for the year ended December 31, 2016 of $33.1 million represented an increase of $1.8 million, or 6%, from $31.3 million for the year ended December 31, 2015. In constant currency, adjusted EBITDA for the region for the year ended December 31, 2016 increased $3.2 million or 11% from the year ended December 31, 2015, primarily as a result of a $3.0 million or 22% increase in adjusted EBITDA at Belmond Copacabana Palace and a $1.8 million increase in adjusted EBITDA at Belmond Safaris. This was offset by a decrease in adjusted EBITDA of $1.1 million at Belmond La Résidence d'Angkor. As a percentage of Rest of world owned hotels revenue, adjusted EBITDA remained flat at 25% for the years ended December 31, 2016 and 2015.

Owned trains and cruises
 
2017 compared to 2016

Revenue was $63.2 million in the year ended December 31, 2017, an increase of $3.9 million, or 7%, from $59.3 million in the year ended December 31, 2016. In constant currency, revenue increased $6.2 million or 11% primarily as a result of the Belmond Grand Hibernian train, which commenced its first full year of operations in 2017 and contributed an increase of $4.0 million for the year ended December 31, 2017. The Belmond Royal Scotsman train grew revenue by $2.2 million or 39% year-over-year primarily as a result of generating higher-revenue charter business and the addition of a spa car and four new berths. Additionally, the Venice Simplon-Orient-Express train saw revenue increases of $2.0 million driven by promotional activity surrounding the

47


release of the Hollywood movie 'Murder on the Orient Express' and the Belmond British Pullman train saw revenue increase by $1.4 million due to a higher number of charters operated in the year ended December 31, 2017. This was offset by a combined revenue decrease of $3.4 million at Belmond Road to Mandalay and Belmond Orcaella, the Company's two river cruise ships in Myanmar, as a result of decreased demand for tourism.

Owned trains and cruises reported adjusted EBITDA of $4.4 million for the year ended December 31, 2017, an increase of $0.1 million, or 2%, from $4.3 million for the year ended December 31, 2016. In constant currency, adjusted EBITDA increased $0.3 million or 7% from the year ended December 31, 2016, largely due to a $1.1 million increase in adjusted EBITDA for the Belmond Royal Scotsman, offset by a $0.8 million decrease for Belmond Road to Mandalay, Ayeyarwady River, Myanmar due to decreased demand.

2016 compared to 2015

Revenue was $59.3 million in the year ended December 31, 2016, a decrease of $6.2 million, or 9%, from $65.5 million in the year ended December 31, 2015. In constant currency, revenue decreased $0.3 million or 1% due to a $1.2 million combined revenue decrease at Belmond Road to Mandalay and Belmond Orcaella, the Company’s two river cruise ships in Myanmar, as a result of increased local competition. This was offset by revenue from Belmond Grand Hibernian, which commenced operations in August 2016 and generated revenue of $1.7 million in the year ended December 31, 2016.

Owned trains and cruises reported adjusted EBITDA of $4.3 million for the year ended December 31, 2016 compared to $7.2 million for the year ended December 31, 2015. In constant currency, adjusted EBITDA for the year ended December 31, 2016 decreased $2.3 million or 35% from the year ended December 31, 2015 due to a $1.0 million combined decrease in adjusted EBITDA for the Company's two river cruise ships in Myanmar and a $0.5 million decrease in adjusted EBITDA at Venice-Simplon-Orient-Express.

Part-owned/ managed hotels

2017 compared to 2016

Revenue was $1.0 million in the year ended December 31, 2017, a decrease of $3.4 million, or 77%, from $4.4 million in the year ended December 31, 2016. In constant currency, revenue for Part-owned/managed hotels decreased $3.4 million or 76%, largely due to a provision made against management and reservation fees at Inn at Perry Cabin by Belmond, St Michaels, Maryland in respect of an agreement entered into on April 7, 2017 pursuant to which Belmond agreed to guarantee specified budgeted EBITDA levels earned by the owner for each of the 2017 and 2018 fiscal years.

Adjusted EBITDA for Part-owned/managed hotels for the year ended December 31, 2017 of $6.8 million represented an increase of $0.5 million or 8% from earnings of $6.3 million for the year ended December 31, 2016. In constant currency, adjusted EBITDA for Part-owned/ managed hotels increased $0.5 million or 8%, primarily as a result of an increase in occupancy at the joint venture's two hotels in Cusco.

2016 compared to 2015

Revenue was $4.4 million in the year ended December 31, 2016, a decrease of $0.8 million, or 15%, from $5.2 million in the year ended December 31, 2015. In constant currency, revenue for Part-owned/managed hotels decreased $0.8 million or 15%, primarily due to the May 2015 sale of Hotel Ritz by Belmond, which had produced revenues of $0.3 million for the year ended December 31, 2015, and a decline in revenue for PBH, the Company's Peru hotels joint venture primarily as a result of a year-over-year decrease in group business at the joint venture’s two hotels in Cusco.

Adjusted EBITDA for Part-owned/managed hotels for the year ended December 31, 2016 of $6.3 million represented a decrease of $0.8 million or 11% for the year ended December 31, 2015. In constant currency, adjusted EBITDA for Part-owned/ managed hotels decreased $0.8 million or 11% as a result of a $1.1 million or 16% decline in adjusted EBITDA for PBH.

Part-owned/managed trains
 
2017 compared to 2016

Revenue was $10.9 million in the year ended December 31, 2017, an increase of $0.1 million, or 1%, from $10.8 million in the year ended December 31, 2016. In constant currency, revenue for Part-owned/managed trains increased $0.1 million or 1%.


48


Adjusted EBITDA for Part-owned/managed trains for the year ended December 31, 2017 of $24.0 million represented a decrease of $1.9 million or 7% from $25.9 million for the year ended December 31, 2016. In constant currency, adjusted EBITDA for Part-owned/managed trains decreased $1.9 million or 7%, due to an adjusted EBITDA decrease of $2.0 million or 8% for the Company's Peruvian train joint venture, PeruRail, as a result of increases in fuel costs and other operating expenses.

2016 compared to 2015

Revenue was $10.8 million in the year ended December 31, 2016, an increase of $2.6 million, or 32%, from $8.2 million in the year ended December 31, 2015. In constant currency, revenue for Part-owned/managed trains increased $2.6 million or 32%, resulting from the Company's PeruRail joint venture which commenced transport of copper concentrate from the Las Bambas mine.

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.

Adjusted EBITDA for Part-owned/managed trains for the year ended December 31, 2016 of $25.9 million represented an increase of $6.1 million or 31% from $19.8 million for the year ended December 31, 2015. In constant currency, adjusted EBITDA for Part-owned/managed trains increased $6.1 million or 31%, resulting from the Company's PeruRail joint venture which commenced transport of copper concentrate from the Las Bambas mine.

Unallocated corporate costs

2017 compared to 2016

Adjusted central costs were $39.2 million for the year ended December 31, 2017 (including $5.8 million of non-cash share-based compensation expense), an increase of $0.8 million, or 2%, from $38.4 million in the year ended December 31, 2016 (including $7.6 million of non-cash share-based compensation expense). In constant currency, adjusted central costs increased $1.5 million or 4%, mainly due to increased development and other corporate headcount to support the strategic growth plan. As percentage of revenue, adjusted central costs were 7% for both the year ended December 31, 2017 and the year ended December 31, 2016.

2016 compared to 2015

Adjusted central costs were $38.4 million for the year ended December 31, 2016 (including $7.6 million of non-cash share-based compensation expense), a decrease of $5.7 million, or 13%, from $44.1 million for the year ended December 31, 2015 (including $9.7 million of non-cash share-based compensation expense). In constant currency, adjusted central costs decreased $3.5 million or 8%, primarily due to lower legal and professional expenses. As a percentage of revenue, adjusted central costs decreased slightly to 7% of revenue for the year ended December 31, 2016 from 8% for the year ended December 31, 2015.
 
Depreciation and amortization
 
2017 compared to 2016

Depreciation and amortization was $62.9 million for the year ended December 31, 2017, an increase of $10.5 million, or 20%, from $52.4 million in the year ended December 31, 2016, primarily as a result of the completion of several capital projects and accelerated depreciation charge to write off assets that are expected to be replaced. Depreciation and amortization as a percentage of revenue increased to 11% for the year ended December 31, 2017 from 10% for the year ended December 31, 2016.

2016 compared to 2015

Depreciation and amortization was $52.4 million in the year ended December 31, 2016, an increase of $1.9 million, or 4% from $50.5 million in the year ended December 31, 2015. Depreciation and amortization as a percentage of revenue increased to 10% for the year ended December 31, 2016 and from 9% for the year ended December 31, 2015. This is primarily due to a $1.3 million accelerated depreciation charge on assets as part of the renovation project at Belmond La Residence d'Angkor.


49


Gain on extinguishment of debt

2017 compared to 2016

For the year ended December 31, 2017, there was no gain on extinguishment of debt. For the year ended December 31, 2016, there was a gain on extinguishment of debt of $1.2 million. In June 2016, Charleston Center LLC amended its secured loan of $86.0 million increasing the amount of the loan to $112.0 million. The additional proceeds were used to repay a 1984 development loan from a municipal agency in the principal amount of $10.0 million and accrued interest of $16.8 million. In connection with the early repayment of the loan, Belmond negotiated a discount that resulted in a net gain, reported in the statements of consolidated operations during the year ended December 31, 2016, of $1.2 million upon extinguishment of debt, including the payment of a tax indemnity to its partners in respect of their allocation of income from the discount arising on the cancellation of indebtedness.
    
2016 compared to 2015

For the year ended December 31, 2016, there was a gain on extinguishment of debt of $1.2 million. In June 2016, Charleston Center LLC amended its secured loan of $86.0 million increasing the amount of the loan to $112.0 million. The additional proceeds were used to repay a 1984 development loan from a municipal agency in the principal amount of $10.0 million and accrued interest of $16.8 million. In connection with the early repayment of the loan, Belmond negotiated a discount that resulted in a net gain, reported in the statements of consolidated operations during the year ended December 31, 2016, of $1.2 million upon extinguishment of debt, including the payment of a tax indemnity to its partners in respect of their allocation of income from the discount arising on the cancellation of indebtedness. For the year ended December 31, 2015, there was no gain on extinguishment of debt.

Interest income, interest expense and foreign currency, net

2017 compared to 2016

Interest income, interest expense and foreign currency, net was an expense of $34.4 million for the year ended December 31, 2017, an increase of $15.3 million, or 80%, from an expense of $19.1 million for the year ended December 31, 2016. The increase in net expense was primarily due to a foreign exchange loss of $3.0 million that was recognized in the year ended December 31, 2017 compared to a foreign exchange gain of $9.2 million in the year ended December 31, 2016 as a result of volatility in the British pound foreign exchange rate against the U.S. dollar over the last two years.

2016 compared to 2015

Interest income, interest expense and foreign currency, net was an expense of $19.1 million for the year ended December 31, 2016, a decrease of $17.1 million, or 47%, from an expense of $36.2 million for the year ended December 31, 2015. In the year ended December 31, 2016 there was a foreign exchange gain recognized of $9.2 million compared with a loss of $5.0 million recognized in the year ended December 31, 2015.

Provision for income taxes

2017 compared to 2016

The provision for income taxes was $6.6 million in the year ended December 31, 2017, a decrease of $9.8 million, or 60%, from a provision for income taxes of $16.4 million in the year ended December 31, 2016. This was mainly as a result of a decrease in deferred tax liabilities of $19.8 million following a reduction in the corporate tax rate in the U.S. from 35 to 21 percent effective January 1, 2018, following enactment of the Tax Cuts and Jobs Act of 2017. The tax charge for the year ended December 31, 2016 included a benefit of $3.4m in respect of uncertain tax positions following settlements agreed in October 2016. See Note 14 to the Financial Statements.
 
2016 compared to 2015

The provision for income taxes was $16.4 million in the year ended December 31, 2016, a decrease of $0.6 million, or 4%, from $17.0 million in the year ended December 31, 2015. The decrease in tax charge in the year ended December 31, 2016 was mainly as a result of a reduction in provision for uncertain tax position of $3.4 million following settlements agreed in October 2016, which was partially offset by an increase in earnings before income taxes in the United States, Italy, Brazil and other territories. The effective tax rate is higher than the UK statutory tax rate mainly because the Company operates in a number of territories that have higher statutory tax rates than the UK.


50


(Loss)/gain on disposal of property, plant and equipment

2017 compared to 2016

A loss on disposal of $0.2 million was recognized in the year ended December 31, 2017 compared with a $0.9 million gain in the year ended December 31, 2016. The loss in the year ended December 31, 2017 relates to the sale of Belmond Northern Belle in November 2017, offset by the recognition of the $0.6 million deferred gain following the March 2014 sale of Inn at Perry Cabin by Belmond, which Belmond has continued to manage under a management contract. The gain in the year ended December 31, 2016 relates to the deferred gain following the sale of Inn at Perry Cabin by Belmond, with the remainder relating to the gain on sale of the spa building at Belmond Casa de Sierra Nevada, Mexico in September 2016.

2016 compared to 2015

A gain on disposal of $0.9 million was recognized in the year ended December 31, 2016 compared with a $20.3 million gain in the year ended December 31, 2015. $19.7 million of the gain recorded in 2015 relates to the sale of Hotel Ritz by Belmond, the Company’s hotel joint venture in Spain, in May 2015, with the remainder relating to the recognition of the deferred gain following the 2014 sale of Inn at Perry Cabin by Belmond.

Impairment of property, plant and equipment

2017 compared to 2016

There was an $8.2 million impairment charge of property, plant and equipment in the year ended December 31, 2017. This consisted of $7.1 million at Belmond Road to Mandalay as a result of increased competition and anticipated lower occupancy levels and $1.1 million at Belmond Northern Belle due to forecasted lower demand. There was a $1.0 million impairment of property, plant and equipment in the year ended December 31, 2016 which related to Belmond Orcaella. See Note 8 to the Financial Statements for consideration of potential impairment triggers.

     2016 compared to 2015

There was a $1.0 million impairment charge of property, plant and equipment in the year ended December 31, 2016. This consisted of the write-down to fair value of property, plant and equipment at Belmond Orcaella, one of the Company's river cruises in Myanmar. There were no impairments of property, plant and equipment in the year ended December 31, 2015.

(Losses)/earnings from unconsolidated companies, net of tax
 
2017 compared to 2016

Losses from unconsolidated companies, net of tax were $10.2 million in the year ended December 31, 2017, a decrease of $21.2 million from earnings of $11.0 million in the year ended December 31, 2016. An impairment charge of $58.5 million was recorded in FTSA, the Company's joint venture that has a concession from the Government of Peru to operate the track network in the southern and southeastern Peru. Belmond's equity share of this impairment is $29.3 million which is reco