Orient-Express Hotels announced today a major expansion of its business in South East Asia, with the acquisition of the Pansea hotels group for approximately US$25 million. The transaction will be completed within the next 4 weeks, in advance of the high season which starts in August.

On May 25, 2006 the company announced its acquisition of the 50% of the Napasai property in Koh Samui, Thailand, not owned by Pansea. Acquisition of the entire Pansea company (actually a Hong Kong company called HOSIA which owns the Pansea business) will result in considerable tax savings in HOSIA in connection with the Napasai transaction.

In 2004 Orient-Express Hotels provided a convertible loan to HOSIA which was expected to convert into approximately 25% of HOSIA's equity. At the same time it entered into put/call arrangements which were expected to be exercised in 2009, resulting in Orient-Express Hotels buying the remaining 75% of HOSIA's equity at eight times 2008 EBITDA. The company believes that the US$25 million purchase price is slightly less than ten times annualized EBITDA projected for the remainder of 2006. Also, earnings from the two Bali properties have been depressed due to the most recent bombing on the island and the Ubud Hanging Gardens property being in its buildup phase, having only opened in July, 2005.

Pansea's six properties are all unique. In the ancient capital of Laos, Luang Prabang, La Residence Phou Vao is considered the leading hotel in the area. In Yangon (Rangoon), Myanmar (Burma) the Governor's Residence, set in beautiful gardens in the Embassy District, is the best performing hotel in this city and links with the company's Road to Mandalay river cruise ship which operates between Mandalay and Pagan. The Napasai property in Koh Samui is a nearly new hotel, opened in February, 2004, and is the most luxurious hotel on the island, enjoying rapid growth, and has significant potential for residential development. In Siem Reap, Cambodia, La Residence d'Angkor, designed entirely in Khmer style and set in lovely gardens close to the famous Angkor Wat and surrounding temples, is the leading boutique property in the area. In Bali, Jimbaran Puri has the finest beachfront on the island while Ubud Hanging Gardens clings to the side of the famous Ubud Gorge. Ubud is the cultural center of the island. In total, inclusive of Napasai, 271 rooms are being acquired at an approximate cost of US$140,000 each.

The six Pansea properties plus the Eastern & Oriental tourist train which operates between Singapore and Bangkok, and the Road to Mandalay cruise ship in Myanmar, give Orient-Express Hotels a meaningful presence in South East Asia and a platform on which to expand. When it appeared that HOSIA was unlikely to add additional properties before 2009 (although there is considerable scope for growth of the existing six hotels) and its owners signalled a willingness to sell earlier, Orient-Express Hotels decided to seize this opportunity to accelerate its expansion plans for South East Asia. Orient-Express Hotels intends to retain the excellent management team of Pansea both at the head office in Bangkok and at the six hotels and expects to use their skills to fuel the expansion in South East Asia. In due course the company will be considering additional properties in Singapore, Hong Kong, Vietnam and China.

Mr. James B. Sherwood, Chairman, said that he had negotiated in 2003 the original transaction with Stanislas Rollin and Robert Molinari, the owners of HOSIA, after having been extremely impressed with the very special architecture, settings and high standards of cuisine which have been hallmarks of Pansea. The partnership arrangement worked smoothly and he thanked Messrs. Rollin and Molinari for making it so, adding that he hoped the company would be able to cooperate with them in other hotel projects in the future.

Mr. Simon M.C. Sherwood, President, said that he was confident the Pansea acquisition would be a launchpad for the company in South East Asia, allowing it to move forward much more rapidly than if it had waited until 2009. He indicated that investment in the existing properties would be the first step.

Descriptions of the Pansea properties including photographs can be viewed at http://media.corporate-ir.net/media_files/irol/12/122664/pansea_hotels.pdf

Management believes that EBITDA (net earnings adjusted for interest expense, foreign currency, tax, depreciation and amortization) is a useful measure of operating performance, for example to help determine the ability to incur capital expenditure or service indebtedness, because it is not affected by non-operating factors such as leverage and the historic cost of assets. EBITDA is also a financial performance measure commonly used in the hotel and leisure industry, although the company's EBITDA may not be comparable in all instances to that disclosed by other companies. EBITDA does not represent net cash provided by operating, investing and financing activities under U.S. generally accepted accounting principles, is not necessarily indicative of cash available to fund all cash flow needs, and should not be considered as an alternative to earnings from operations or net earnings under U.S. generally accepted accounting principles for purposes of evaluating operating performance.