---

---

SECURITIES AND EXCHANGE COMMISSIONWASHINGTON, D.C. 20549

---

FORM 10-Q

(Mark One)

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

For the quarterly period ended September 30, 2001

or

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

For the transition period from to

Commission file number 1-16017

---

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

Bermuda(State or other jurisdiction of incorporation or organization)

98-0223493(I.R.S. Employer Identification No.)41 Cedar Avenue
P.O. Box HM 1179
Hamilton HMEX, Bermuda(Address of principal executive offices)

(Zip Code)


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

---

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

/x/  Yes               / /  No

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

---

---





PART I

Orient-Express Hotels Ltd. and Subsidiaries        Consolidated Balance Sheets

|                                                                                    |                                                                        | September 30,
2001                  |         | December 31,
2000 |    
|----------------------------------------------------------------------------------- | ---------------------------------------------------------------------- | ----------------------------------- | ------- | ----------------- | ---
|
|Assets                                                                              |                                                                        |                                     |         |                   |    
|Cash and cash equivalents                                                           |                                                                        | $                                   | 55,334  |                   | $  
|Accounts receivable, net of allowances of $498 and $422                             |                                                                        |                                     | 46,995  |                   |    
|Inventories                                                                         |                                                                        |                                     | 17,373  |                   |    
|                                                                                    |                                                                        |                                     |         |                   |    
|Total current assets                                                                |                                                                        |                                     | 119,702 |                   |    
|                                                                                    |                                                                        |                                     |         |                   |    
|Property, plant and equipment, less accumulated depreciation of $79,957 and $71,159 |                                                                        |                                     | 581,040 |                   |    
|Investments                                                                         |                                                                        |                                     | 87,674  |                   |    
|Intangible assets                                                                   |                                                                        |                                     | 29,753  |                   |    
|Other assets                                                                        |                                                                        |                                     | 2,927   |                   |    
|                                                                                    |                                                                        |                                     |         |                   |    
|                                                                                    |                                                                        | $                                   | 821,096 |                   | $  
|                                                                                    |                                                                        |                                     |         |                   |    
|Liabilities and Shareholders' Equity                                                |                                                                        |                                     |         |                   |    
|Working capital facilities                                                          |                                                                        | $                                   | 3,934   |                   | $  
|Accounts payable                                                                    |                                                                        |                                     | 20,939  |                   |    
|Accrued liabilities                                                                 |                                                                        |                                     | 35,022  |                   |    
|Deferred revenue                                                                    |                                                                        |                                     | 12,242  |                   |    
|Current portion of long-term debt                                                   |                                                                        |                                     | 40,336  |                   |    
|                                                                                    |                                                                        |                                     |         |                   |    
|Total current liabilities                                                           |                                                                        |                                     | 112,473 |                   |    
|Long-term debt                                                                      |                                                                        |                                     | 303,635 |                   |    
|Deferred income taxes                                                               |                                                                        |                                     | 4,651   |                   |    
|                                                                                    |                                                                        |                                     |         |                   |    
|                                                                                    |                                                                        |                                     | 420,759 |                   |    
|                                                                                    |                                                                        |                                     |         |                   |    
|Minority interest                                                                   |                                                                        |                                     | 5,029   |                   |    
|                                                                                    |                                                                        |                                     |         |                   |    
|Shareholders' equity:                                                               |                                                                        |                                     |         |                   |    
|                                                                                    | Class A common shares $0.01 par value (120,000,000 shares authorized): |                                     |         |                   |    
|                                                                                    |                                                                        | Issued28,405,301 (200028,440,601) |         |                   | 284
|                                                                                    | Class B common shares $0.01 par value (120,000,000 shares authorized): |                                     |         |                   |    
|                                                                                    |                                                                        | Issued20,503,877 (200020,503,877) |         |                   | 205
|Additional paid-in capital                                                          |                                                                        |                                     | 228,191 |                   |    
|Retained earnings                                                                   |                                                                        |                                     | 200,207 |                   |    
|Accumulated other comprehensive loss                                                |                                                                        |                                     | (33,398 | )                 |    
|Less: reduction due to class B common shares owned by subsidiaries18,044,478       |                                                                        |                                     | (181    | )                 |    
|                                                                                    |                                                                        |                                     |         |                   |    
|Total shareholders' equity                                                          |                                                                        |                                     | 395,308 |                   |    
|                                                                                    |                                                                        |                                     |         |                   |    
|Commitments                                                                         |                                                                        |                                     |        |                   |    
|                                                                                    |                                                                        |                                     |         |                   |    
|                                                                                    |                                                                        | $                                   | 821,096 |                   | $  
|                                                                                    |                                                                        |                                     |         |                   |    

See
notes to consolidated financial statements.





Orient-Express Hotels Ltd. and Subsidiaries        Statements of Consolidated Operations

|                                                   |                                     | Three months ended September 30, |       
|-------------------------------------------------- | ----------------------------------- | -------------------------------- | ------
|
|
|Revenue                                            |                                     | $                                | 65,773
|Earnings from unconsolidated companies             |                                     |                                  | 2,180 
|                                                   |                                     |                                  |       
|                                                   |                                     |                                  | 67,953
|                                                   |                                     |                                  |       
|Expenses:                                          |                                     |                                  |       
|                                                   | Depreciation and amortization       |                                  |       
|                                                   | Operating                           |                                  |       
|                                                   | Selling, general and administrative |                                  |       
|                                                   |                                     |                                  |       
|Total expenses                                     |                                     |                                  | 54,428
|                                                   |                                     |                                  |       
|Earnings from operations before net finance costs  |                                     |                                  | 13,525
|Interest expense, net                              |                                     |                                  | (4,898
|Interest and related income                        |                                     |                                  |      
|                                                   |                                     |                                  |       
|Net finance costs                                  |                                     |                                  | (4,898
|                                                   |                                     |                                  |       
|Earnings before income taxes                       |                                     |                                  | 8,627 
|Provision for income taxes                         |                                     |                                  | 1,126 
|                                                   |                                     |                                  |       
|Net earnings                                       |                                     | $                                | 7,501 
|                                                   |                                     |                                  |       
|Net earnings per class A and class B common share: |                                     |                                  |       
|                                                   | Basic and diluted                   |                                  | $     
|                                                   |                                     |                                  |       

See
notes to consolidated financial statements.



|                                                   |                                     | Nine months ended September 30, |        
|-------------------------------------------------- | ----------------------------------- | ------------------------------- | -------
|
|
|Revenue                                            |                                     | $                               | 195,746
|Earnings from unconsolidated companies             |                                     |                                 | 6,815  
|                                                   |                                     |                                 |        
|                                                   |                                     |                                 | 202,561
|                                                   |                                     |                                 |        
|Expenses:                                          |                                     |                                 |        
|                                                   | Depreciation and amortization       |                                 |        
|                                                   | Operating                           |                                 |        
|                                                   | Selling, general and administrative |                                 |        
|                                                   |                                     |                                 |        
|Total expenses                                     |                                     |                                 | 157,606
|                                                   |                                     |                                 |        
|Earnings from operations before net finance costs  |                                     |                                 | 44,955 
|Interest expense, net                              |                                     |                                 | (15,020
|Interest and related income                        |                                     |                                 | 377    
|                                                   |                                     |                                 |        
|Net finance costs                                  |                                     |                                 | (14,643
|                                                   |                                     |                                 |        
|Earnings before income taxes                       |                                     |                                 | 30,312 
|Provision for income taxes                         |                                     |                                 | 3,504  
|                                                   |                                     |                                 |        
|Net earnings                                       |                                     | $                               | 26,808 
|                                                   |                                     |                                 |        
|Net earnings per class A and class B common share: |                                     |                                 |        
|                                                   | Basic and diluted                   |                                 | $      
|                                                   |                                     |                                 |        

See
notes to consolidated financial statements.





Orient-Express Hotels Ltd. and Subsidiaries        Statements of Consolidated Cash Flows

|                                                 |                                                                                     | Nine months ended September 30,            |        
|------------------------------------------------ | ----------------------------------------------------------------------------------- | ------------------------------------------ | -------
|
|
|Cash flows from operating activities:            |                                                                                     |                                            |        
|                                                 | Net earnings                                                                        |                                            | $      
|                                                 |                                                                                     |                                            |        
|                                                 | Adjustments to reconcile net earnings to net cash provided by operating activities: |                                            |        
|                                                 | Depreciation and amortization                                                       |                                            |        
|                                                 | Undistributed earnings of affiliates and other non-cash items                       |                                            |        
|                                                 | Change in assets and liabilities net of effects from acquisition of subsidiaries:   |                                            |        
|                                                 |                                                                                     | Decrease/(increase) in accounts receivable |        
|                                                 |                                                                                     | Increase in inventories                    |        
|                                                 |                                                                                     | Increase in accounts payable               |        
|                                                 |                                                                                     |                                            |        
|                                                 |                                                                                     | Total adjustments                          |        
|                                                 |                                                                                     |                                            |        
|Net cash provided by operating activities        |                                                                                     |                                            | 42,382 
|                                                 |                                                                                     |                                            |        
|Cash flows from investing activities:            |                                                                                     |                                            |        
|                                                 | Capital expenditures                                                                |                                            |        
|                                                 | Acquisitions and investments, net of cash acquired                                  |                                            |        
|                                                 | Proceeds from sale of fixed assets and other                                        |                                            |        
|                                                 |                                                                                     |                                            |        
|Net cash used in investing activities            |                                                                                     |                                            | (64,790
|                                                 |                                                                                     |                                            |        
|Cash flows from financing activities:            |                                                                                     |                                            |        
|                                                 | Working capital facilities and redrawable loans repaid                              |                                            |        
|                                                 | Issuance of common shares                                                           |                                            |        
|                                                 | Issuance of long-term debt                                                          |                                            |        
|                                                 | Principal payments under long-term debt                                             |                                            |        
|                                                 | Purchase and cancellation of common shares                                          |                                            |        
|                                                 | Movement in SCL investment prior to initial public offering                         |                                            |        
|                                                 |                                                                                     |                                            |        
|Net cash provided by financing activities        |                                                                                     |                                            | 62,496 
|                                                 |                                                                                     |                                            |        
|Total cash flows                                 |                                                                                     |                                            | 40,088 
|Effect of exchange rate changes on cash          |                                                                                     |                                            | (643   
|                                                 |                                                                                     |                                            |        
|Net increase in cash                             |                                                                                     |                                            | 39,445 
|Cash and cash equivalents at beginning of period |                                                                                     |                                            | 15,889 
|                                                 |                                                                                     |                                            |        
|Cash and cash equivalents at end of period       |                                                                                     | $                                          | 55,334 
|                                                 |                                                                                     |                                            |        

See
notes to consolidated financial statements.





Orient-Express Hotels Ltd. and Subsidiaries        Statements of Consolidated Shareholders' Equity

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

See
notes to consolidated financial statements.





Orient-Express Hotels Ltd. and Subsidiaries        Notes to Consolidated Financial Statements

1.  Basis of financial statement presentation

(a)Accounting policies

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

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

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

(b)Net earnings per share

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

Nine months ended September 30,2001

2000Basic

30,899

26,776Diluted

30,907

26,857


Three months ended September 30,2001

2000Basic

30,898

28,509Diluted

30,909

28,945


(c)Accounting change

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

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

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

Nine months ended September 30,2001

2000Net earnings on common shares

$
26,808

$
28,111Other comprehensive income (loss):Foreign currency translation adjustments


(7,596
)

(7,386
)Cumulative effect of change in accounting principle (SFAS 133) on other comprehensive income


(1,333
)

Changes in fair value of derivatives


(617
)

Comprehensive income

$
17,262

$
20,725


(d)Recent accounting pronouncements

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

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

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

2.  Acquisitions and investments

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

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

3.  Property, plant and equipment

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

September 30,
2001

December 31,
2000Freehold and leased land and buildings

$
471,280

$
437,094Machinery and equipment


109,152


104,335Fixtures, fittings and office equipment


64,440


62,400River cruiseship


16,125


16,118660,997


619,947Less: accumulated depreciation


79,957


71,159$
581,040

$
548,788


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

4.  Long-term debt

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

September 30,
2001

December 31,
2000Loans from banks secured by property, plant and equipment payable over periods of 1 to 12 years, with a weighted average interest rate of 5.21 and 6.94 percent, respectively, primarily based on LIBOR

$
343,181

$
274,852Loan secured by a river cruiseship payable over 5 years, with a weighted average interest rate of 8.50 percent based on LIBOR





1,062Obligations under capital lease


790


859343,971


276,773Less: current portion


40,336


53,722$
303,635

$
223,051


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

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

Year ending December 31,Remainder of 2002

$
25,7062003


25,5252004


90,2712005


32,8202006 and thereafter


129,313$
303,635


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

5.  Income taxes

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

Nine months ended September 30, 2001Current

Deferred

TotalUnited States

$
1,501

$
460

$
1,961Other foreign


2,382


(839
)

1,543$
3,883

$
(379
)
$
3,504


Nine months ended September 30, 2000Current

Deferred

TotalUnited States

$
2,179

$
800

$
2,979Other foreign


783


274


1,057$
2,962

$
1,074

$
4,036


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

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

September 30,
2001

December 31,
2000Gross deferred tax assets

$
65,243

$
40,871Less: Valuation allowance


(48,990
)

(25,063
)Net deferred tax assets


16,253


15,808Deferred tax liabilities


(20,904
)

(21,264
)Net deferred tax liabilities

$
(4,651
)
$
(5,456
)


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

6.  Supplemental cash flow information

Nine months ended September 30,2001

2000(Dollars in thousands)Cash paid for:Interest

$
15,330

$
17,221Income taxes

$
5,425

$
4,187


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

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

Fair value of assets acquired

$
22,352

$
47,636Cash paid


(19,600
)

(42,934
)Liabilities assumed

$
2,752

$
4,702


7.  Commitments

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

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

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

Nine months ended September 30,2001

2000Revenue:Hotels and restaurants

$
167,098

$
170,680Tourist trains and cruises


28,648


29,643$
195,746

$
200,323Earnings from unconsolidated companies:Hotels and restaurants

$
4,473

$
4,218Tourist trains and cruises


2,342


1,636$
6,815

$
5,854Depreciation and amortization:Hotels and restaurants

$
10,477

$
9,832Tourist trains and cruises


1,764


1,402$
12,241

$
11,234Earnings from operations before net finance costs:Hotels and restaurants

$
48,169

$
52,518Tourist trains and cruises


4,141


4,90852,310


57,426Central selling, general and administrative costs


(7,355
)

(7,169
)44,955


50,257Net finance costs (1)


(14,643
)

(18,110
)Earnings before income taxes


30,312


32,147Provision for income taxes


3,504


4,036Net earnings

$
26,808

$
28,111Capital expenditure:Hotels and restaurants

$
24,381

$
24,620Tourist trains and cruises


1,500


4,810$
25,881

$
29,430


September 30,
2001

December 31,
2000Identifiable assets:Hotels and restaurants

$
731,667

$
644,517Tourist trains and cruises


89,429


81,359$
821,096

$
725,876


---



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

Nine months ended September 30,2001

2000Revenue:Europe

$
92,736

$
92,143North America


59,651


66,545Rest of the world


43,359


41,635$
195,746

$
200,323


September 30,
2001

December 31,
2000Long-lived assets, at book value:Europe

$
239,160

$
224,869North America


195,963


185,201Rest of the world


233,591


205,691$
668,714

$
615,761


9.  Related party transactions

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

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





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

RESULTS OF OPERATIONS

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

Three months ended
September 302001

2000%

%Revenue:Hotels and restaurants

83

83Tourist trains and cruises

17

17100

100Expenses:Depreciation and amortization

6

5Operating

46

45Selling, general and administrative

28

24Net finance costs

7

9Earnings before income taxes

13

17Provision of income taxes

2

2Net earnings as a percentage of total revenue

11

15




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

Three months ended
September 302001

2000Revenue:Owned Hotels:Europe

$
31.0

$
29.6North America


9.5


12.6Rest of the world


11.6


12.6Hotel management and part ownership interests


2.2


2.7Restaurants


2.0


3.3Tourist trains and cruises


11.7


12.5Total

$
68.0

$
73.3EBITDA:Owned Hotels:Europe

$
14.3

$
13.4North America


(0.5
)

1.7Rest of the world


2.6


3.3Hotel management and part ownership interests


2.2


2.7Restaurants


(0.3
)

0.2Tourist trains and cruises


2.2


3.6Central overheads


(2.8
)

(2.3
)Total EBITDA

$
17.7

$
22.6


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

Nine months ended
September 302001

2000%

%Revenue:Hotels and restaurants

85

85Tourist trains and cruises

15

15100

100Expenses:Depreciation and amortization

6

5Operating

45

45Selling, general and administrative

26

25Net finance costs

8

9Earnings before income taxes

15

16Provision of income taxes

2

2Net earnings as a percentage of total revenue

13

14




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

Nine months ended
September 302001

2000Revenue:Owned Hotels:Europe

$
67.8

$
65.6North America


45.1


48.7Rest of the world


38.8


38.7Hotel management and part ownership interests


8.1


8.3Restaurants


11.8


13.6Tourist trains and cruises


31.0


31.3Total

$
202.6

$
206.2EBITDA:Owned Hotels:Europe

$
25.9

$
24.6North America


11.6


14.6Rest of the world


11.0


11.9Hotel management and part ownership interests


8.1


8.3Restaurants


2.1


3.0Tourist trains and cruises


5.9


6.3Central overheads


(7.4
)

(7.2
)Total EBITDA

$
57.2

$
61.5


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

Revenue

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

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

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

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

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

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

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

Depreciation and Amortization

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

Operating Expenses

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

Selling, General and Administrative Expenses

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

Earnings from Operations

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

Net Finance Costs

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

Taxes on Income

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

Net Earnings

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

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

Revenue

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

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

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

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

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

Depreciation and Amortization

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

Operating Expenses

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

Selling, General and Administrative Expenses

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

Earnings from Operations

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

Net Finance Costs

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

Taxes on Income

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

Net Earnings

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

LIQUIDITY AND CAPITAL RESOURCES

Working Capital

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

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



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

Cash Flow

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

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

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

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

Indebtedness

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

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

Liquidity

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

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

QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

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

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

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

RECENT ACCOUNTING PRONOUNCEMENTS

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





PART II

ITEM 1.  Legal Proceedings

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

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

ITEM 5.  Other Information

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

ITEM 6.  Exhibits and Reports on Form 8-K

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

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





SIGNATURES

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

|                         |  | ORIENT-EXPRESS HOTELS LTD.
|------------------------ |  | --------------------------
|                         |  | By:                       
|Dated: November 13, 2001 |  |                           





EXHIBIT INDEX

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

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



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