UNITED STATES
SECURITIES AND EXCHANGE COMMISSIONWASHINGTON, D.C. 20549

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FORM 10-Q

|(Mark One)                                                    |                                                                                         
|------------------------------------------------------------- | ----------------------------------------------------------------------------------------
|ý                                                             | Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 
|For the quarterly period ended September 30, 2004,
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 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.)
|--------------------------------------------------------------------- | ---------------------------------------------------------- | ----------------------------------------------
|                                                                      | 22 Victoria Street
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. Yes ý    No

Indicate by check mark whether the registrant is an accelerated filer (under Rule 12b-2 of the Exchange
Act). Yes ý    No

As of October 29, 2004, 31,790,601 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 a subsidiary of Orient-Express Hotels Ltd. and 11,943,901 Class A shares and 2,459,399 Class B shares owned by Sea
Containers Ltd.



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PART IFINANCIAL INFORMATION

ITEM 1. Financial Statements

Orient-Express Hotels Ltd. and Subsidiaries

Consolidated Balance Sheets (unaudited)

|                                                                                        |                                                                                       | September 30,
2004 |           | December 31,
2003 |    
|--------------------------------------------------------------------------------------- | ------------------------------------------------------------------------------------- | ------------------ | --------- | ----------------- | ---
|
|Assets                                                                                  |                                                                                       |                    |           |                   |    
|Cash and cash equivalents                                                               |                                                                                       | $                  | 51,753    |                   | $  
|Accounts receivable, net of allowances of $961 and $976                                 |                                                                                       |                    | 35,940    |                   |    
|Due from related parties                                                                |                                                                                       |                    | 15,020    |                   |    
|Prepaid expenses and other                                                              |                                                                                       |                    | 14,111    |                   |    
|Inventories                                                                             |                                                                                       |                    | 26,972    |                   |    
|                                                                                        |                                                                                       |                    |           |                   |    
|Total current assets                                                                    |                                                                                       |                    | 143,796   |                   |    
|Property, plant and equipment, net of accumulated depreciation of $150,431 and $127,772 |                                                                                       |                    | 844,542   |                   |    
|Investments                                                                             |                                                                                       |                    | 120,419   |                   |    
|Goodwill                                                                                |                                                                                       |                    | 29,529    |                   |    
|Other assets                                                                            |                                                                                       |                    | 19,311    |                   |    
|                                                                                        |                                                                                       |                    |           |                   |    
|                                                                                        |                                                                                       | $                  | 1,157,597 |                   | $  
|                                                                                        |                                                                                       |                    |           |                   |    
|Liabilities and Shareholders' Equity                                                    |                                                                                       |                    |           |                   |    
|Working capital facilities                                                              |                                                                                       | $                  | 20,071    |                   | $  
|Accounts payable                                                                        |                                                                                       |                    | 18,979    |                   |    
|Due to related parties                                                                  |                                                                                       |                    | 5,859     |                   |    
|Accrued liabilities                                                                     |                                                                                       |                    | 46,499    |                   |    
|Deferred revenue                                                                        |                                                                                       |                    | 21,992    |                   |    
|Current portion of long-term debt and capital leases                                    |                                                                                       |                    | 67,945    |                   |    
|                                                                                        |                                                                                       |                    |           |                   |    
|Total current liabilities                                                               |                                                                                       |                    | 181,345   |                   |    
|Long-term debt and obligations under capital leases                                     |                                                                                       |                    | 437,626   |                   |    
|Deferred income taxes                                                                   |                                                                                       |                    | 4,479     |                   |    
|                                                                                        |                                                                                       |                    |           |                   |    
|                                                                                        |                                                                                       |                    | 623,450   |                   |    
|                                                                                        |                                                                                       |                    |           |                   |    
|Minority interest                                                                       |                                                                                       |                    | 4,085     |                   |    
|                                                                                        |                                                                                       |                    |           |                   |    
|Shareholders' equity:                                                                   |                                                                                       |                    |           |                   |    
|                                                                                        | Preferred shares $0.01 par value per share (30,000,000 shares authorized, issued nil) |                    |           |                  |    
|                                                                                        | Class A common shares $0.01 par value per share (120,000,000 shares authorized):      |                    |           |                   |    
|                                                                                        |                                                                                       | Issued31,790,601  |           |                   | 318
|                                                                                        | Class B common shares $0.01 par value per share (120,000,000 shares authorized):      |                    |           |                   |    
|                                                                                        |                                                                                       | Issued20,503,877  |           |                   | 205
|Additional paid-in capital                                                              |                                                                                       |                    | 278,821   |                   |    
|Retained earnings                                                                       |                                                                                       |                    | 269,715   |                   |    
|Accumulated other comprehensive loss, net of income taxes                               |                                                                                       |                    | (18,816   | )                 |    
|Less: reduction due to Class B common shares owned by a subsidiary18,044,478           |                                                                                       |                    | (181      | )                 |    
|                                                                                        |                                                                                       |                    |           |                   |    
|Total shareholders' equity                                                              |                                                                                       |                    | 530,062   |                   |    
|                                                                                        |                                                                                       |                    |           |                   |    
|Commitments and contingencies                                                           |                                                                                       |                    |          |                   |    
|                                                                                        |                                                                                       |                    |           |                   |    
|                                                                                        |                                                                                       | $                  | 1,157,597 |                   | $  
|                                                                                        |                                                                                       |                    |           |                   |    

See
notes to condensed consolidated financial statements.

2

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Orient-Express Hotels Ltd. and Subsidiaries

Statements of Consolidated Operations (unaudited)

|                                                       |                                     | Three months ended September 30, |        
|------------------------------------------------------ | ----------------------------------- | -------------------------------- | -------
|
|
|Revenue                                                |                                     | $                                | 100,025
|                                                       |                                     |                                  |        
|Expenses:                                              |                                     |                                  |        
|                                                       | Depreciation and amortization       |                                  |        
|                                                       | Operating                           |                                  |        
|                                                       | Selling, general and administrative |                                  |        
|                                                       |                                     |                                  |        
|Total expenses                                         |                                     |                                  | 84,218 
|                                                       |                                     |                                  |        
|Earnings from operations before net finance costs      |                                     |                                  | 15,807 
|Interest expense, net                                  |                                     |                                  | (4,826 
|Interest and related income                            |                                     |                                  | 75     
|                                                       |                                     |                                  |        
|Net finance costs                                      |                                     |                                  | (4,751 
|                                                       |                                     |                                  |        
|Earnings before income taxes                           |                                     |                                  | 11,056 
|Provision for income taxes                             |                                     |                                  | 2,504  
|                                                       |                                     |                                  |        
|Earnings before earnings from unconsolidated companies |                                     |                                  | 8,552  
|Earnings from unconsolidated companies net of tax      |                                     |                                  | 2,943  
|                                                       |                                     |                                  |        
|Net earnings on class A and class B common shares      |                                     | $                                | 11,495 
|                                                       |                                     |                                  |        
|Net earnings per class A and class B common share:     |                                     |                                  |        
|                                                       | Basic and diluted                   |                                  | $      
|                                                       |                                     |                                  |        
|Dividends per class A and class B common share         |                                     | $                                | 0.025  
|                                                       |                                     |                                  |        

See
notes to condensed consolidated financial statements, including Note 1(j) regarding reclassification of earnings from unconsolidated companies.

3

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Orient-Express Hotels Ltd. and Subsidiaries

Statements of Consolidated Operations (unaudited)

|                                                       |                                     | Nine months ended September 30, |        
|------------------------------------------------------ | ----------------------------------- | ------------------------------- | -------
|
|
|Revenue                                                |                                     | $                               | 264,395
|                                                       |                                     |                                 |        
|Expenses:                                              |                                     |                                 |        
|                                                       | Depreciation and amortization       |                                 |        
|                                                       | Operating                           |                                 |        
|                                                       | Selling, general and administrative |                                 |        
|                                                       |                                     |                                 |        
|Total expenses                                         |                                     |                                 | 234,992
|                                                       |                                     |                                 |        
|Earnings from operations before net finance costs      |                                     |                                 | 29,403 
|Interest expense, net                                  |                                     |                                 | (14,776
|Interest and related income                            |                                     |                                 | 169    
|                                                       |                                     |                                 |        
|Net finance costs                                      |                                     |                                 | (14,607
|                                                       |                                     |                                 |        
|Earnings before income taxes                           |                                     |                                 | 14,796 
|Provision for income taxes                             |                                     |                                 | 3,867  
|                                                       |                                     |                                 |        
|Earnings before earnings from unconsolidated companies |                                     |                                 | 10,929 
|Earnings from unconsolidated companies net of tax      |                                     |                                 | 8,871  
|                                                       |                                     |                                 |        
|Net earnings on class A and class B common shares      |                                     | $                               | 19,800 
|                                                       |                                     |                                 |        
|Net earnings per class A and class B common share:     |                                     |                                 |        
|                                                       | Basic and diluted                   |                                 | $      
|                                                       |                                     |                                 |        
|Dividends per class A and class B common share         |                                     | $                               | 0.075  
|                                                       |                                     |                                 |        

See
notes to condensed consolidated financial statements, including Note 1(j) regarding reclassification of earnings from unconsolidated companies.

4

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Orient-Express Hotels Ltd. and Subsidiaries

Statements of Consolidated Cash Flows (unaudited)

|                                                             |                                                                                     | 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                                                |                                                                                   |        
|                                                             | Other non-cash items                                                                |                                                                                   |        
|                                                             | Change in assets and liabilities net of effects from acquisition of subsidiaries:   |                                                                                   |        
|                                                             |                                                                                     | Increase in receivables, prepaid expenses and other                               |        
|                                                             |                                                                                     | Increase in inventories                                                           |        
|                                                             |                                                                                     | Increase in payables, accrued liabilities, deferred revenue and minority interest |        
|                                                             |                                                                                     |                                                                                   |        
|                                                             | Total adjustments                                                                   |                                                                                   |        
|                                                             |                                                                                     |                                                                                   |        
|Net cash provided by operating activities                    |                                                                                     |                                                                                   | 45,021 
|                                                             |                                                                                     |                                                                                   |        
|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                      |                                                                                     |                                                                                   | (58,739
|                                                             |                                                                                     |                                                                                   |        
|Cash flows from financing activities:                        |                                                                                     |                                                                                   |        
|                                                             | Net proceeds from working capital facilities and redrawable loans                   |                                                                                   |        
|                                                             | Issuance of long-term debt                                                          |                                                                                   |        
|                                                             | Principal payments under long-term debt                                             |                                                                                   |        
|                                                             | Payment of common share dividends                                                   |                                                                                   |        
|                                                             |                                                                                     |                                                                                   |        
|Net cash (used in)/provided by financing activities.         |                                                                                     |                                                                                   | (15,925
|                                                             |                                                                                     |                                                                                   |        
|Effect of exchange rate changes on cash and cash equivalents |                                                                                     |                                                                                   | 49     
|                                                             |                                                                                     |                                                                                   |        
|Net (decrease)/increase in cash and cash equivalents         |                                                                                     |                                                                                   | (29,594
|Cash and cash equivalents at beginning of period             |                                                                                     |                                                                                   | 81,347 
|                                                             |                                                                                     |                                                                                   |        
|Cash and cash equivalents at end of period                   |                                                                                     | $                                                                                 | 51,753 
|                                                             |                                                                                     |                                                                                   |        

See
notes to condensed consolidated financial statements.

5

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Orient-Express Hotels Ltd. and Subsidiaries

Statement of Changes in Consolidated Shareholders' Equity and Comprehensive Loss (unaudited)

|(Dollars in thousands)      |                                                          | Preferred
Shares
At Par
Value |   | 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
Subsidiary |         | Total
Comprehensive
Income/(Loss) |  
|--------------------------- | -------------------------------------------------------- | ----------------------------- | - | ---------------------------------- | - | ---------------------------------- | - | -------------------------- | --- | ----------------- | - | ------------------------------------ | - | --------------------------------- | ------- | --------------------------------- | -
|Balance, January 1, 2004    |                                                          | $                             |  |                                    | $ | 318                                |   | $                          | 205 |                   | $ | 278,821                              |   | $                                 | 252,484 |                                   | $
|Dividends on common shares  |                                                          |                               |  |                                    |   |                                   |   |                            |    |                   |   |                                     |   |                                   | (2,569  | )                                 |  
|Comprehensive income:       |                                                          |                               |   |                                    |   |                                    |   |                            |     |                   |   |                                      |   |                                   |         |                                   |  
|                            | Net earnings                                             |                               |   |                                   |   |                                    |  |                            |     |                  |   |                                      |  |                                   |         | 19,800                            |  
|                            | Foreign currency translation adjustments                 |                               |   |                                   |   |                                    |  |                            |     |                  |   |                                      |  |                                   |         |                                  |  
|                            | Change in fair value of derivative financial instruments |                               |   |                                   |   |                                    |  |                            |     |                  |   |                                      |  |                                   |         |                                  |  
|                            |                                                          |                               |   |                                    |   |                                    |   |                            |     |                   |   |                                      |   |                                   |         |                                   |  
|                            |                                                          |                               |   |                                    |   |                                    |   |                            |     |                   |   |                                      |   |                                   |         |                                   |  
|                            |                                                          |                               |   |                                    |   |                                    |   |                            |     |                   |   |                                      |   |                                   |         |                                   |  
|Balance, September 30, 2004 |                                                          | $                             |  |                                    | $ | 318                                |   | $                          | 205 |                   | $ | 278,821                              |   | $                                 | 269,715 |                                   | $
|                            |                                                          |                               |   |                                    |   |                                    |   |                            |     |                   |   |                                      |   |                                   |         |                                   |  

See
notes to condensed consolidated financial statements.

6

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Orient-Express Hotels Ltd. and Subsidiaries

Notes to Condensed Consolidated Financial Statements

1.     Basis of financial statement presentation

In this report Orient-Express Hotels Ltd. is referred to as the "Company", and the Company and its subsidiaries are referred to collectively as "OEH". At
September 30, 2004, Sea Containers Ltd., a Bermuda company ("SCL"), owned 42% of the equity shares in the Company.

(a)   Accounting policies

For a description of significant accounting policies and basis of presentation, see Notes 1, 4 and 15 to the consolidated financial statements in the Company's
2003 Form 10-K annual report. As of September 30, 2004, these significant accounting policies have not changed from December 2003. "SFAS" means Statement of Financial
Accounting Standards and "FIN" means an accounting interpretation, both of the U.S. Financial Accounting Standards Board.

The
condensed consolidated financial statements are unaudited and have been prepared following the rules and regulations of the U.S. Securities and Exchange Commission.

In
the opinion of management, all adjustments necessary for a fair statement of the results of operations for the three and nine months ended September 30, 2004 and 2003, which
are all of a normal recurring nature, have been reflected in the information provided. Due to the seasonal nature of OEH's business, operating results for an interim period are not necessarily
indicative of a full year's operating results.

(b)   Earnings per share

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

Nine months ended September 30,2004

2003Basic

34,250

30,800Effect of dilution

99

Diluted

34,349

30,800


Three months ended September 30,2004

2003Basic

34,250

30,800Effect of dilution

78

53Diluted

34,328

30,853


Stock
options with exercise prices greater than the average market price of the common shares have been excluded from the computations of diluted weighted average shares outstanding.
There were approximately 40,000 and 156,000 of these options for the nine months ended September 30, 2004 and 2003, respectively, and approximately 55,000 and 70,000 of these options for the
three months ended September 30, 2004 and 2003, respectively.

7

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(c)   Derivative financial instruments

For the nine months ended September 30, 2004 and 2003, the change in the fair market value of derivative instruments resulted in a charge of $157,000 and
$65,000, respectively, to other comprehensive loss.

(d)   Goodwill

OEH's goodwill consists of $700,000 related to the tourist trains and cruises reporting segment and $28,829,000 related to the hotels and restaurants reporting
segment. There were no changes in the carrying amount of goodwill for the nine month period ended September 30, 2004.

8

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(e)   Stock-based compensation

OEH's compensation cost for share options is accreted in accordance with the intrinsic value method under Accounting Principles Board Opinion No. 25. If
compensation cost for the Company's stock option plans had been determined based on fair values as of the date of grant, OEH's net earnings and earnings per share would have been reported as follows
(dollars in thousands, except per share amounts):

Nine months ended September 30,2004

2003Net earnings on Class A and Class B common shares:As reported

$
19,800

$
14,991Deduct: Total stock-based employee compensation expense determined under fair value based method, net of related tax


(635
)

(757
)Pro forma

$
19,165

$
14,234Basic and diluted earnings per share:As reported:Basic and diluted

$
0.58

$
0.49Pro forma:Basic and diluted

$
0.56

$
0.46


Three months ended September 30,2004

2003Net earnings on Class A and Class B common shares:As reported

$
11,495

$
8,180Deduct: Total stock-based employee compensation expense determined under fair value based method, net of related tax


(261
)

(283
)Pro forma

$
11,234

$
7,897Basic and diluted earnings per share:As reported:Basic and diluted

$
0.34

$
0.27Pro forma:Basic and diluted

$
0.33

$
0.26


The
pro forma figures in the preceding tables may not be representative of pro forma amounts in future years.

(f)    Dividends

On March 19, June 18 and September 20, 2004, the Company declared a quarterly dividend of $0.025 per common share.

9

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(g)   Pensions

Components of net periodic pension benefit cost were as follows (dollars in thousands):

Nine months ended September 30,2004

2003Service cost

$
619

$
383Interest cost


288


260Expected return on plan assets


(328
)

(202
)Amortization of prior service cost





7Amortization of net loss


103


60Net periodic benefit cost

$
682

$
508


Three months ended September 30,2004

2003Service cost

$
206

$
128Interest cost


96


87Expected return on plan assets


(109
)

(67
)Amortization of prior service cost





2Amortization of net loss


34


20Net periodic benefit cost

$
227

$
170


As
reported in Note 7 to the financial statements in the Company's 2003 Form 10-K annual report, OEH expected to contribute $954,000 to its pension plans in
2004. As of September 30, 2004, $582,000 of contributions have been made. OEH anticipates contributing an additional $242,000 to fund its pension plans in 2004 for a total of $824,000.

(h)   Earnings from unconsolidated companies

Earnings from unconsolidated companies are presented net of tax and include OEH's share of the net earnings of its equity investments as well as interest income
related to loans and advances to the equity investees amounting to $6,049,000 and $4,647,000 for the nine months ended September 30, 2004 and 2003, respectively, and $2,100,000 and $1,593,000
for the three months ended September 30, 2004 and 2003, respectively.

(i)    Recent accounting pronouncements

In January 2003, the Financial Accounting Standards Board issued FIN No. 46 "Consolidation of Variable Interest Entities", as amended by FIN
No. 46R which applied immediately to variable interest entities created after January 31, 2003, and with respect to variable interest entities held before February 1, 2003,
applied beginning with OEH's quarter ended March 31, 2004. OEH has evaluated all of its existing joint-venture agreements, and has determined that none of its joint ventures is within the scope
of FIN No. 46R. The adoption of FIN No. 46R had no impact on OEH.

(j)    Reclassifications

Certain items in 2003 have been reclassified to conform to the 2004 presentation. Earnings from unconsolidated companies are now presented below earnings from
operations before net finance costs.

10

---



2.     Acquisitions and investments

On May 25, 2004, OEH acquired a 50% interest in a luxury French canal and river cruise business called Afloat in France. As part of this investment OEH
acquired the five canal boats operated in the business. The total investment was $3,000,000 paid in cash.

On
February 2, 2004, OEH entered into an agreement with the Pansea Hotel group, the owner of six deluxe hotels in Southeast Asia. Under this agreement, OEH is to provide a maximum
of $8,000,000 in loans to the hotel holding company which are convertible after three years into approximately 25% of the holding company's shares. As of September 30, 2004, OEH had provided
$4,625,000 in loans to Pansea which is recorded in other assets. In addition, OEH paid $1,400,000 which is recorded in other assets for options exercisable after three to five years to acquire all of
the holding company's shares, and the existing shareholders have the right to put their shares to OEH after five years. OEH is not managing the hotels but is marketing them along with its other
properties.

On
April 25, 2003, OEH acquired a 50% interest in the Hotel Ritz in Madrid, Spain through a 50/50 joint venture with a Spanish real estate investment company. The purchase price
was $135,000,000, and each joint venture partner contributed $22,000,000 with the balance financed by loans. Subsidiaries of the Company were obligated on $27,000,000 of these loans until the
completion in August 2004 of various legal procedures in Spain, when the debt was assumed by the joint venture and became entirely non-recourse to OEH. As a result OEH's investment
and debt have been reduced. In addition to its interest in the hotel, OEH acquired the exclusive long-term management contract of the hotel. This investment is accounted for under the
equity method of accounting.

Summarized
financial data for OEH's unconsolidated companies for the periods during which the investments were held by OEH are as follows (dollars in thousands):

September 30,
2004

December 31,
2003Current assets

$
40,358

$
42,172Property, plant and equipment, net


341,446


279,298Other assets


5,342


4,472Total assets

$
387,146

$
325,942Current liabilities

$
39,154

$
43,538Long-term debt


203,273


144,251Other liabilities


78,735


71,351Total shareholders' equity


65,984


66,802Total liabilities and shareholders' equity

$
387,146

$
325,942


Nine nonths ended September 30,2004

2003Revenue

$
96,317

$
74,991Earnings from operations before net finance costs

$
12,905

$
9,661Net (losses)

$
(515
)
$
(606
)


11

---



3.     Property, plant and equipment

The major classes of property, plant and equipment are as follows (dollars in thousands):

September 30,
2004

December 31,
2003Freehold and leased land and buildings

$
705,317

$
678,683Machinery and equipment


137,333


135,584Fixtures, fittings and office equipment


134,024


119,191River cruiseship


18,299


16,571994,973


950,029Less: accumulated depreciation


(150,431
)

(127,772
)$
844,542

$
822,257


The
major classes of assets under capital leases are as follows (dollars in thousands):

September 30,
2004

December 31,
2003Land and buildings

$
13,591

$
14,080Machinery and equipment


2,230


1,964Fixtures, fittings and office equipment


4,399


4,22920,220


20,273Less: accumulated depreciation


(2,248
)

(1,626
)$
17,972

$
18,647


4.     Long-term debt and obligations under capital lease

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

September 30,
2004

December 31,
2003Bank loans on property, plant and equipment payable over periods of 1 to 12 years, with a weighted average interest rate of 3.98% and 3.74%, respectively, primarily based on LIBOR

$
486,689

$
530,003Bank loan on a river cruiseship payable over 5 years, with an interest rate of 2.78% based on LIBOR





3,000Obligations under capital lease


18,882


21,185505,571


554,188Less: current portion


67,945


51,271$
437,626

$
502,917


In
March 2004, the last guarantee by SCL of an OEH bank loan (December 31, 2003$19,088,000 principal amount) that predated the Company's initial public
offering in August 2000 was released and cancelled.

Certain
credit agreements of OEH have restrictive covenants. At September 30, 2004, OEH was in compliance with these covenants. OEH does not currently have any covenants in any of
its loan agreements which limit the payment of dividends.

12

---



The
following is a summary of the aggregate maturities of long-term debt, including obligations under capital lease, at September 30, 2004 (dollars in thousands):

Year ending December 31,2005

$
13,3752006


110,4382007


100,1412008


156,2232009 and thereafter


57,449$
437,626


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

The provision for income taxes consists of the following (dollars in thousands):

Nine months ended September 30, 2004Current

Deferred

TotalUnited States

$
93

$
271

$
364Other foreign


2,082


1,421


3,503$
2,175

$
1,692

$
3,867


Nine months ended September 30, 2003Current

Deferred

TotalUnited States

$
466

$
50

$
516Other foreign


2,049


290


2,339$
2,515

$
340

$
2,855


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,
2004

December 31,
2003Gross deferred tax assets

$
70,524

$
71,467Less: Valuation allowance


(39,886
)

(39,886
)Net deferred tax assets


30,638


31,581Deferred tax liabilities


(35,117
)

(34,427
)Net deferred tax liabilities

$
(4,479
)
$
(2,846
)


13

---



The
deferred tax assets consist of tax loss carry forwards. In addition, at September 30, 2004, OEH has recorded a deferred tax asset of $691,000 (December 31,
2003$691,000) representing the future tax benefits of accrued pension costs recognized in other comprehensive income pursuant to SFAS No. 87, "Employers' Accounting for Pensions".
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 30,2004

2003(Dollars in thousands)Cash paid for:Interest

$
15,075

$
13,771Income taxes

$
2,988

$
2,401


In
conjunction with acquisitions and investments (see Note 2), liabilities were assumed relating to non-cash investing and financing activities as follows (dollars in
thousands):

Fair value of assets acquired

$
3,000

$
49,777Cash paid


(3,000
)

(22,000
)Liabilities assumed

$


$
27,777


7.     Accumulated other comprehensive loss

The accumulated balances for each component of other comprehensive loss are as follows (dollars in thousands):

September 30,
2004

December 31,
2003Foreign currency translation adjustments

$
(17,138
)
$
(17,682
)Derivative financial instruments


(65
)

92Minimum pension liability, net of tax


(1,613
)

(1,613
)$
(18,816
)
$
(19,203
)


8.     Commitments

Outstanding contracts to purchase fixed assets were approximately $7,500,000 at September 30, 2004 (December 31, 2003$11,200,000).

14

---



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

As reported in the Company's 2003 Form 10-K annual report, OEH has two reporting segments, (i) hotels and restaurants and
(ii) tourist trains and cruises. Financial information regarding these business segments is as follows, with net finance costs appearing net of capitalized interest and interest and related
income (dollars in thousands):

|                               |                            | Nine months ended September 30,
|------------------------------ | -------------------------- | -------------------------------
|
|Revenue:                       |                            |                                
|                               | Hotels and restaurants:    |                                
|                               |                            | Owned hotelsEurope            
|                               |                            | North America                 
|                               |                            | Rest of world                 
|                               |                            | Hotel management fees          
|                               |                            | Restaurants                    
|                               |                            |                                
|                               |                            |                                
|                               | Tourist trains and cruises |                                
|                               |                            |                                
|                               |                            | $                              
|                               |                            |                                
|Depreciation and amortization: |                            |                                
|                               | Hotels and restaurants:    |                                
|                               |                            | Owned hotelsEurope            
|                               |                            | North America                 
|                               |                            | Rest of world                 
|                               |                            | Restaurants                    
|                               |                            |                                
|                               |                            |                                
|                               | Tourist trains and cruises |                                
|                               |                            |                                
|                               |                            | $                              
|                               |                            |                                

15

---



|                                                       |                            | Nine months ended September 30,           |        
|------------------------------------------------------ | -------------------------- | ----------------------------------------- | -------
|
|Earnings from operations:                              |                            |                                           |        
|                                                       | Hotels and restaurants:    |                                           |        
|                                                       |                            | Owned hotelsEurope                       |        
|                                                       |                            | North America                            |        
|                                                       |                            | Rest of world                            |        
|                                                       |                            | Hotel management fees                     |        
|                                                       |                            | Restaurants                               |        
|                                                       |                            |                                           |        
|                                                       |                            |                                           | 37,584 
|                                                       | Tourist trains and cruises |                                           |        
|                                                       |                            |                                           |        
|                                                       |                            |                                           | 40,959 
|Central selling, general and administrative costs      |                            |                                           | (11,556
|                                                       |                            |                                           |        
|                                                       |                            |                                           | 29,403 
|Net finance costs                                      |                            |                                           | (14,607
|                                                       |                            |                                           |        
|Earnings before income taxes                           |                            |                                           | 14,796 
|Provision for income taxes                             |                            |                                           | 3,867  
|                                                       |                            |                                           |        
|Earnings before earnings from unconsolidated companies |                            |                                           | 10,929 
|Earnings from unconsolidated companies                 |                            |                                           | 8,871  
|                                                       |                            |                                           |        
|Net earnings                                           |                            | $                                         | 19,800 
|                                                       |                            |                                           |        
|Earnings from unconsolidated companies:                |                            |                                           |        
|                                                       | Hotels and restaurants     |                                           |        
|                                                       |                            | Hotel management/part ownership interests |        
|                                                       |                            | Restaurants                               |        
|                                                       |                            |                                           |        
|                                                       |                            |                                           | 5,811  
|                                                       | Tourist trains and cruises |                                           |        
|                                                       |                            |                                           |        
|                                                       |                            | $                                         | 8,871  
|                                                       |                            |                                           |        
|Capital expenditure:                                   |                            |                                           |        
|                                                       | Hotels and restaurants:    |                                           |        
|                                                       |                            | Owned hotelsEurope                       |        
|                                                       |                            | North America                            |        
|                                                       |                            | Rest of world                            |        
|                                                       |                            | Restaurants                               |        
|                                                       |                            | Hotel management/part ownership interests |        
|                                                       |                            |                                           |        
|                                                       |                            |                                           | 43,428 
|                                                       | Tourist trains and cruises |                                           |        
|                                                       |                            |                                           |        
|                                                       |                            | $                                         | 44,141 
|                                                       |                            |                                           |        

16

---



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

Nine months ended September 30,2004

2003Revenue:Europe

$
134,987

$
126,422North America


68,562


63,965Rest of world


60,846


47,768$
264,395

$
238,155


10.   Related party transactions

For the nine months ended September 30, 2004, OEH paid subsidiaries of SCL $4,009,000 (2003$3,421,000) for the provision of various services
incurred during this period under a shared services agreement between OEH and SCL. These amounts have been settled in accordance with the shared services agreement and are included in selling, general
and administrative expenses.

OEH
guarantees a $3,000,000 bank loan to Eastern and Oriental Express Ltd. in which OEH has a minority shareholder interest. This guarantee was in place before December 31,
2002.

OEH
manages under a long-term contract the Charleston Place Hotel (accounted for under the equity method) and has made loans to the hotel-owning company. For the nine months
ended September 30, 2004, OEH earned $2,931,000 (2003$2,933,000) in management fees which are recorded in revenue, and $6,049,000 (2003$4,647,000) in interest income
on partnership and other loans, which are recorded in earnings from unconsolidated companies. These loans have an indefinite maturity period and bear interest at a spread over LIBOR.

OEH
manages under long-term contracts the Hotel Monasterio and the Machu Picchu Sanctuary Lodge owned by its 50/50 joint venture with local Peruvian interests, as well as the
50/50-owned PeruRail operation, and provides loans, guarantees and other credit accommodation to these joint ventures. In the nine months ended September 30, 2004, OEH earned management and
guarantee fees of $2,620,000 (2003$1,200,000), which are recorded in revenue, and loan interest of $77,000 (2003$159,000) which is recorded in earnings from unconsolidated
companies from the joint ventures. At September 30, 2004, loans to the hotels aggregated $2,000,000, bear interest at a spread over LIBOR and are due in 2005. At the same date, OEH had a
$750,000 subordinated loan to the PeruRail operation with an indefinite maturity date and interest also at a spread over LIBOR. All of the guarantees relating to the Company's investments in Peru were
in place prior to December 31, 2002.

OEH
manages under a long-term contract the Hotel Ritz in Madrid, Spain, in which OEH acquired a 50% interest on April 25, 2003 (see Note 2) and is accounted for
under the equity method. For the nine months ended September 30, 2004, OEH earned $664,000 (2003$687,000) in management fees, which are included in revenue.

11.   Subsequent event

Effective November 1, 2004, OEH acquired El Encanto Hotel and Garden Villas in Santa Barbara, California for $26,000,000 paid in cash. Part of the purchase
price was financed with a bank loan.

17

---





ITEM 2. Management's Discussion and Analysis of Financial Condition and Results of Operations

Results of Operations

Three Months Ended September 30, 2004 compared to Three Months Ended September 30, 2003

OEH's operating results for the three months ended September 30, 2004 and 2003, expressed as a percentage of revenue, were as follows:

|                                              |                                     | Three months ended September 30, |   
|--------------------------------------------- | ----------------------------------- | -------------------------------- | --
|
|
|Revenue:                                      |                                     |                                  |   
|                                              | Hotels and restaurants              |                                  | 83
|                                              | Tourist trains and cruises          |                                  | 17
|                                              |                                     |                                  |   
|                                              |                                     | 100                              |   
|Expenses:                                     |                                     |                                  |   
|                                              | Depreciation and amortization       |                                  | 7 
|                                              | Operating                           |                                  | 48
|                                              | Selling, general and administrative |                                  | 29
|Net finance costs                             |                                     | 5                                |   
|                                              |                                     |                                  |   
|Earnings before income taxes                  |                                     | 11                               |   
|Provision for income taxes                    |                                     | (3                               | ) 
|Earnings from unconsolidated companies        |                                     | 3                                |   
|                                              |                                     |                                  |   
|Net earnings as a percentage of total revenue |                                     | 11                               |   
|                                              |                                     |                                  |   

Net
earnings as adjusted for interest, tax, depreciation and amortization ("EBITDA") of OEH's operations for the three months ended September 30, 2004 and 2003 is analyzed as
follows (dollars in millions):

|             |                        | Three months ended September 30,            |     
|------------ | ---------------------- | ------------------------------------------- | ----
|
|EBITDA:      |                        |                                             |     
|             | Hotels and restaurants |                                             |     
|             |                        | Owned hotelsEurope                         |     
|             |                        | North America                              |     
|             |                        | Rest of world                              |     
|             |                        | Hotel management & part ownership interests |     
|             |                        | Restaurants                                 |     
|             | Trains and cruises     |                                             |     
|             | Central overheads      |                                             |     
|             |                        |                                             |     
|Total EBITDA |                        | $                                           | 26.0
|             |                        |                                             |     

18

---



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

|             |                               | Three months ended September 30,
|------------ | ----------------------------- | --------------------------------
|
|Net earnings |                               | $                               
|Add:         |                               |                                 
|             | Depreciation and amortization |                                 
|             | Net finance costs             |                                 
|             | Provision for income taxes    |                                 
|             |                               |                                 
|EBITDA       |                               | $                               
|             |                               |                                 

Management
believes that EBITDA is a useful measure of operating performance, 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. However,
EBITDA does not represent cash flow from operations as defined by 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 under U.S. generally accepted accounting principles for purposes of evaluating results of operations.

19

---



Operating
information for OEH's owned hotels for the three months ended September 30, 2004 and 2003 is as follows:

|                                | Three months ended
September 30, |     |  |     | 
|------------------------------- | -------------------------------- | --- |  | --- | 
|
|Average Daily Rate (in dollars) |                                  |     |  |     | 
|                                | Europe                           | 740 |  | 581 | 
|                                | North America                    | 260 |  | 253 | 
|                                | Rest of the world                | 235 |  | 211 | 
|                                | Worldwide                        | 414 |  | 382 | 
|Rooms Sold (in thousands)       |                                  |     |  |     | 
|                                | Europe                           | 39  |  | 49  | 
|                                | North America                    | 31  |  | 30  | 
|                                | Rest of the world                | 43  |  | 35  | 
|                                |                                  |     |  |     | 
|                                | Worldwide                        | 113 |  | 114 | 
|RevPAR (in dollars)             |                                  |     |  |     | 
|                                | Europe                           | 477 |  | 390 | 
|                                | North America                    | 156 |  | 151 | 
|                                | Rest of the world                | 122 |  | 88  | 
|                                | Worldwide                        | 240 |  | 210 | 

|                               |                   |  |     |  |     | Change % |   
|------------------------------ | ----------------- |  | --- |  | --- | -------- | --
|
|Same Store RevPAR (in dollars) |                   |  |     |  |     |          |   
|                               | Europe            |  | 477 |  | 410 |          | 16
|                               | North America     |  | 149 |  | 149 |          | 0 
|                               | Rest of the world |  | 122 |  | 88  |          | 39
|                               | Worldwide         |  | 241 |  | 205 |          | 18

Average
daily rate is the average amount achieved for the rooms sold. RevPAR is revenue per available room, that is the rooms department revenue divided by the number of available rooms
for each night of operation. Same store RevPAR is a comparison based on the operations of the same units in each period, such as by excluding the effect of any acquisitions or major refurbishments.

Overview

The net earnings for the period was $11.5 million ($0.34 per common share) on revenue of $100.0 million, compared with net earnings of
$8.2 million ($0.27 per common share) on revenue of $88.5 million in the prior year third quarter. During the quarter OEH experienced a continuing broad recovery in demand for all its
products.

Overall,
the average daily room rate of owned hotels in U.S. dollars was up 8% in the third quarter to $414 from $382 in the prior year period. Same store RevPAR in U.S. dollars was up
18% to $241 from $205 in the year earlier period.

Capital
expenditure on existing properties is beginning to produce solid returns. OEH currently plans to complete the Hotel Caruso in Ravello, Italy in time for the summer season of 2005
with a June opening planned.

20

---



Revenue

Total revenue increased by $11.5 million, or 13%, from $88.5 million in the three months ended September 30, 2003 to $100.0 million in
the three months ended September 30, 2004. Hotels and restaurants revenue increased by $7.6 million, or 10%, from $75.8 million in the three months ended September 30, 2003
to $83.4 million in the three months ended September 30, 2004. Excluding the revenue from the Hotel Quinta do Lago which was sold in November 2003, hotels and restaurants revenue
increased by $13.1 million, or 19%, from $70.3 million for the three months ended September 30, 2003 to $83.4 million in the three months ended September 30, 2004.
Tourist trains and cruises revenue increased by $3.9 million, or 31%, from $12.7 million for the three months ended September 30, 2003 to $16.6 million for the three months
ended September 30, 2004.

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

Europe.Excluding revenue from the Hotel Quinta do Lago in the third quarter of 2003 ($5.5 million), revenue increased
by $6.8 million, or 17%, from $40.1 million for the three months ended September 30, 2003 to $46.9 million in the three months ended September 30, 2004.

On
a same store basis, excluding the Quinta do Lago, RevPAR in local currency increased by 6% but in U.S. dollars this translated into an increase of 16% as the euro was stronger against
the dollar in the third quarter of 2004 compared to the third quarter of 2003.

North America.Revenue increased by $1.0 million, or 8%, from $12.9 million in the three months ended
September 30, 2003 to $13.9 million in the three months ended September 30, 2004.

On
a same store basis, RevPAR was flat with the prior year quarter. This was adversely affected by the impact of Hurricane Ivan on the Windsor Court Hotel in New Orleans.

Rest of the World.Revenue increased by $4.8 million, or 36%, from $13.2 million in the three months ended
September 30, 2003 to $18.0 million in the three months ended September 30, 2004.

The
RevPAR on a same store basis for the rest of the world region increased by 31% in local currencies in the three months ended September 30, 2004 compared to the three months
ended September 30, 2003. This translated to a 39% increase when expressed in U.S. dollars primarily as the South African rand and Australian dollar were significantly stronger against the U.S.
dollar in the period over the comparable period of 2003.

Depreciation and amortization

Depreciation and amortization increased by $0.4 million, or 7%, from $6.7 million in the three months ended September 30, 2003 to
$7.1 million in the three months ended September 30, 2004, primarily due to the effect of acquisitions and capital expenditures in 2003 and 2004 as well as the effect of the weakness of
the U.S. dollar against currencies in which OEH records some of its assets.

Operating expenses

Operating expenses increased by $4.1 million, or 9%, from $43.7 million in the three months ended September 30, 2003 to $47.8 million
in the three months ended September 30, 2004, primarily due to the effect of the weakness of the U.S. dollar against currencies in which OEH incurs operating expenses and increased occupancy at
the hotels and trains and cruises.

21

---



Selling, general and administrative expenses

Selling, general and administrative expenses increased by $2.9 million, or 11%, from $26.3 million in the three months ended September 30,
2003 to $29.2 million in the three months ended September 30, 2004, mainly due to the effect of the weakness of the U.S. dollar against currencies in which OEH incurs these expenses and
increased occupancy at OEH's businesses.

Earnings from operations before net finance costs

Earnings from operations increased by $4.1 million, or 35%, from earnings of $11.7 million in the three months ended September 30, 2003 to
earnings of $15.8 million in the three months ended September 30, 2004, due to the factors described in the Overview above.

Net finance costs

Net finance costs increased by $0.2 million to $4.8 million in the three months ended September 30, 2004 compared to the three months ended
September 30, 2003.

Provision for income taxes

The provision for income taxes increased by $0.9 million, from a provision of $1.6 million in the three months ended September 30, 2003 to a
provision of $2.5 million in the three months ended September 30, 2004. 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 increase was mainly due to the increased profitability of some of
these subsidiaries.

Earnings from unconsolidated companies

Earnings from unconsolidated companies increased by $0.3 million, or 11%, from $2.6 million in the three months ended September 30, 2003 to
$2.9 million in the three months ended September 30, 2004. This was mainly due to improved earnings from OEH's investments in Peru.

Net earnings

Net earnings increased by $3.3 million, or 40%, from $8.2 million in the three months ended September 30, 2003 to $11.5 million in the
three months ended September 30, 2004.

22

---



Nine Months Ended September 30, 2004 compared to Nine Months Ended September 30, 2003

OEH's operating results for the nine months ended September 30, 2004 and 2003, expressed as a percentage of revenue, were as follows:

|                                              |                                     | Nine months ended September 30, |   
|--------------------------------------------- | ----------------------------------- | ------------------------------- | --
|
|
|Revenue                                       |                                     |                                 |   
|                                              | Hotels and restaurants              |                                 | 84
|                                              | Tourist trains and cruises          |                                 | 16
|                                              |                                     |                                 |   
|                                              |                                     | 100                             |   
|Expenses:                                     |                                     |                                 |   
|                                              | Depreciation and amortization       |                                 | 8 
|                                              | Operating                           |                                 | 49
|                                              | Selling, general and administrative |                                 | 32
|Net finance costs                             |                                     | 6                               |   
|                                              |                                     |                                 |   
|Earnings before income taxes                  |                                     | 5                               |   
|Provision for incomes taxes                   |                                     | (1                              | ) 
|Earnings from unconsolidated companies        |                                     | 3                               |   
|                                              |                                     |                                 |   
|Net earnings as a percentage of total revenue |                                     | 7                               |   
|                                              |                                     |                                 |   

EBITDA
of OEH's operations for the nine months ended September 30, 2004 and 2003 is analyzed as follows (dollars in millions):

|             |                        | Nine months ended
September 30,               |     
|------------ | ---------------------- | --------------------------------------------- | ----
|
|EBITDA:      |                        |                                               |     
|             | Hotels and restaurants |                                               |     
|             |                        | Owned hotelsEurope                           |     
|             |                        | North America                                |     
|             |                        | Rest of world                                |     
|             |                        | Hotel management and part ownership interests |     
|             |                        | Restaurants                                   |     
|             | Trains and cruises     |                                               |     
|             | Central overheads      |                                               |     
|             |                        |                                               |     
|Total EBITDA |                        | $                                             | 59.4
|             |                        |                                               |     

23

---



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

|             |                               | Nine months ended September 30,
|------------ | ----------------------------- | -------------------------------
|
|Net earnings |                               | $                              
|Add:         |                               |                                
|             | Depreciation and amortization |                                
|             | Net finance costs             |                                
|             | Provision for income taxes    |                                
|             |                               |                                
|EBITDA       |                               | $                              
|             |                               |                                

Operating
information for OEH's owned hotels for the nine months ended September 30, 2004 and 2003 is as follows:

|                                | Nine months ended
September 30, |     |  |     | 
|------------------------------- | ------------------------------- | --- |  | --- | 
|
|Average Daily Rate (in dollars) |                                 |     |  |     | 
|                                | Europe                          | 645 |  | 495 | 
|                                | North America                   | 321 |  | 313 | 
|                                | Rest of the world               | 235 |  | 223 | 
|                                | Worldwide                       | 373 |  | 346 | 
|Rooms Sold (in thousands)       |                                 |     |  |     | 
|                                | Europe                          | 88  |  | 117 | 
|                                | North America                   | 104 |  | 99  | 
|                                | Rest of the world               | 134 |  | 114 | 
|                                |                                 |     |  |     | 
|                                | Worldwide                       | 326 |  | 330 | 
|RevPAR (in dollars)             |                                 |     |  |     | 
|                                | Europe                          | 370 |  | 294 | 
|                                | North America                   | 210 |  | 205 | 
|                                | Rest of the world               | 127 |  | 100 | 
|                                | Worldwide                       | 217 |  | 189 | 

|                               |                   |  |     |  |     | Change % |   
|------------------------------ | ----------------- |  | --- |  | --- | -------- | --
|
|Same Store RevPAR (in dollars) |                   |  |     |  |     |          |   
|                               | Europe            |  | 377 |  | 331 |          | 14
|                               | North America     |  | 212 |  | 204 |          | 4 
|                               | Rest of the world |  | 128 |  | 98  |          | 30
|                               | Worldwide         |  | 218 |  | 189 |          | 15

24

---



Revenue

Total revenue increased by $26.2 million, or 11%, from $238.2 million in the nine months ended September 30, 2003 to $264.4 million in
the nine months ended September 30, 2004. Hotels and restaurants revenue increased by $17.4 million, or 8%, from $205.5 million in the nine months ended September 30, 2003
to $222.9 million in the nine months ended September 30, 2004. Excluding revenue from the Quinta do Lago in 2003, revenue from hotels and restaurants increased by $28.6 million,
or 15%, from $194.3 million for the nine months ended September 30, 2003 to $222.0 million for the nine months ended September 30, 2004. Tourist trains and cruises
increased by $8.7 million, or 27%, from $32.7 million for the nine months ended September 30, 2003 to $41.4 million for the nine months ended September 30, 2004.

Overall,
OEH's same store RevPAR at its owned hotels increased by 15% in U.S. dollars in the nine months ended September 30, 2004 compared to the nine months ended
September 30, 2003. The change in revenue at owned hotels is analyzed on a regional basis as follows:

Europe.Excluding the revenue from the Quinta do Lago for 2003, revenue increased by $10.6 million, or 12%, from
$85.4 million for the nine months ended September 30, 2003 to $96.0 million for the nine months ended September 30, 2004. Same store RevPAR increased by 3% in local
currencies in the nine months ended September 30, 2004 compared to the nine months ended September 30, 2003. This translates to an increase of 14% in U.S. dollars as the euro was
significantly stronger against the U.S. dollar in the period compared to the comparable period in the prior year.

North America.Revenue increased by $3.6 million, or 7%, from $49.8 million in the nine months ended
September 30, 2003 to $53.4 million in the nine months ended September 30, 2004. Same store RevPAR for the North American region increased by 4% in the nine months ended
September 30, 2004 compared to the nine months ended September 30, 2003.

Rest of the World.Revenue increased by $12.2 million, or 28%, from $43.3 million in the nine months ended
September 30, 2003 to $55.5 million in the nine months ended September 30, 2004. The same store RevPAR for the rest of the world region increased by 18% in local currencies in the
nine months ended September 30, 2004 compared to the nine months ended September 30, 2003 but, when translated to U.S. dollars, increased by 30% primarily as the South African rand and
Australian dollar were significantly stronger against the U.S. dollar in the period over the comparable period in 2003.

Depreciation and amortization

Depreciation and amortization increased by $2.5 million, or 13%, from $18.7 million in the nine months ended September 30, 2003 to
$21.2 million in the nine months ended September 30, 2004, primarily due to the effect of acquisitions as well as the effect of the weakness of the U.S. dollar against currencies in
which OEH records some of its assets.

Operating expenses

Operating expenses increased by $11.3 million, or 10%, from $118.2 million in the nine months ended September 30, 2003 to
$129.5 million in the nine months ended September 30, 2004, which was mainly due to higher occupancies at OEH's businesses.

Selling, general and administrative expenses

Selling, general and administrative expenses increased by $8.7 million, or 12%, from $75.6 million in the nine months ended September 30,
2003 to $84.3 million in the nine months ended September 30, 2004, mainly due to higher occupancies at OEH's businesses.

25

---



Earnings from operations

Earnings from operations increased by $3.7 million, or 14%, from $25.7 million in the nine months ended September 30, 2003 to
$29.4 million in the nine months ended September 30, 2004.

Net finance costs

Net finance costs increased by $0.3 million, or 2%, from $14.3 million in the nine months ended September 30, 2003 to $14.6 million in
the nine months ended September 30, 2004.

Taxes on income

The provision for income taxes increased by $1.0 million, or 35%, from $2.9 million in the nine months ended September 30, 2003 to
$3.9 million in the nine months ended September 30, 2004. The increase was mainly due to the increased profitability of some of OEH's taxpaying subsidiaries.

Earnings from unconsolidated companies

Earnings from unconsolidated companies increased by $2.4 million, or 37%, from $6.5 million in the nine months ended September 30, 2003 to
$8.9 million in the nine months ended September 30, 2004.

Net earnings

Net earnings increased by $4.8 million, or 32%, from $15.0 million in the nine months ended September 30, 2003 to $19.8 million in the
nine months ended September 30, 2004.

Liquidity and Capital Resources

Working Capital

OEH had cash and cash equivalents of $51.8 million at September 30, 2004, $29.5 million less than the $81.3 million at
December 31, 2003. At September 30, 2004 and December 31, 2003, the undrawn amounts available to OEH under its short-term lines of credit were $42.0 million and
$35.8 million, respectively. In addition, at September 30, 2004 and December 31, 2003 there were undrawn amounts committed under long-term facilities of
$31.0 million and $32.0 million, respectively. OEH's total cash and undrawn facilities at September 30, 2004 was $124.8 million including the undrawn short-term
lines.

Current
assets less current liabilities, including the current portion of long-term debt, resulted in a working capital deficit of $37.5 million at
September 30, 2004, a decrease in the working capital of $48.3 million from a surplus of $10.8 million at December 31, 2003. The overall decrease in working capital was
comprised of the following:



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

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Cash Flow

Operating Activities.Net cash provided by operating activities increased by $19.4 million from $25.6 million
cash surplus for the nine months ended September 30, 2003 to $45.0 million for the nine months ended September 30, 2004. Of the increase, $4.8 million was attributable to
higher earnings.

Investing Activities.Cash used in investing activities decreased by $34.0 million to $58.7 million for the
nine months ended September 30, 2004, compared to $92.7 million for the nine months ended September 30, 2003. This was mainly due to a reduction in acquisitions and investments of
$35.0 million.

Financing Activities.Cash used in financing activities for the nine months ended September 30, 2004 was
$15.9 million compared to cash provided by financing activities of $81.0 million for the nine months ended September 30, 2003, a reduction of $96.9 million. In the nine
months ended September 30, 2004, OEH had proceeds from borrowings under long-term debt of $20.7 million compared to proceeds of $104.1 million for the nine months
ended September 30, 2003.

Capital Commitments.There were $7.5 million of capital commitments outstanding as of September 30, 2004 mainly
on investments in owned hotels.

Indebtedness

At September 30, 2004, OEH had $505.6 million of long-term debt collateralized by assets ($453.8 million net of cash), including
the current portion, which is repayable over periods of one to 12 years with a weighted average interest rate of 3.98%.See Note 4 to the
financial statements regarding the maturity of long-term debt.

Approximately
50% of the outstanding principal was drawn in euros and the balance primarily in U.S. dollars. At September 30, 2004, OEH had all its borrowings at floating rates.

Liquidity

OEH expects to have available cash from operations and appropriate debt finance sufficient to fund its working capital requirements, capital expenditures,
acquisitions and debt service.

Recent Accounting Pronouncements

As of September 30, 2004, the Company's significant accounting policies and estimates, which are described in Notes 1, 4, and 15 to the financial
statements in the Company's 2003 Form 10-K annual report, have not changed from December 31, 2003, except for the adoption of FIN No. 46R described in
Note 1(i) to the financial statements in this report which had no impact on OEH.

Critical Accounting Policies

For a discussion of these, see under the heading "Critical Accounting Policies" in Item 7Management's Discussion and Analysis in the Company's 2003
Form 10-K annual report.

ITEM 3. 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 OEH's
overall risk management program, which recognizes the unpredictability of financial markets and seeks to mitigate material adverse effects on consolidated earnings and cash flows. OEH does not hold
market rate sensitive financial instruments for trading purposes.

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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. If interest rates increased by 10%, with all other variables held constant, annual net finance costs of OEH would have
increased by approximately $2.0 million on an annual basis based on borrowings at September 30, 2004. 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
market risk relating to foreign currencies and its effects have not changed materially during the first nine months of 2004 from those described in the Company's 2003
Form 10-K annual report.

ITEM 4. Controls and Procedures

The Company's chief executive and financial officers have evaluated the effectiveness of the Company's disclosure controls and procedures (as defined in SEC
Rule 13a-15(e)) as of September 30, 2004 and found no material deficiencies or weaknesses. There have been no changes in the Company's internal control over financial
reporting (as defined in SEC Rule 13a-15(f)) during the third quarter of 2004 that have materially affected, or are reasonably likely to materially affect, the Company's internal
control over financial reporting.

It
should be noted that any system of controls, however well designed and operated, can provide only reasonable, and not absolute, assurance that the objectives of the system are met. In
addition, the design of any control system is based in part upon certain assumptions about the likelihood of future events. Because of these and other inherent limitations of control systems, there
can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions.

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PART IIOTHER INFORMATION

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. During the quarter for which this report is filed, the Company filed the following Form 8-K Current Report:

|Date of Report on Front Cover |  | Item No. |  | Description                                                                                                 
|----------------------------- |  | -------- |  | ------------------------------------------------------------------------------------------------------------
|August 4, 2004                |  | 7 and 12 |  | News release regarding second quarter 2004 consolidated earnings of the Company furnished to the Commission.

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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 9, 2004 |  |                           

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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.

31         Rule 13a-14(a)/15d-14(a)
Certifications.

32         Section 1350
Certification.

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