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

---

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 March 31, 2005
|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 number1-16017

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

|Bermuda                                                        |  | 98-0223493                          
|-------------------------------------------------------------- |  | ------------------------------------
|(State or other jurisdiction of incorporation or organization) |  | (I.R.S. Employer Identification No.)
|22 Victoria Street
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 o

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

As of April 30, 2005, 36,850,601 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 7,443,901 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

|                                                                                        |                                                                             | March 31,
2005                      |           | December 31,
2004 |    
|--------------------------------------------------------------------------------------- | --------------------------------------------------------------------------- | ----------------------------------- | --------- | ----------------- | ---
|
|
|Assets                                                                                  |                                                                             |                                     |           |                   |    
|Cash and cash equivalents                                                               |                                                                             | $                                   | 69,370    |                   | $  
|Accounts receivable, net of allowances of $996 and $1,027                               |                                                                             |                                     | 41,271    |                   |    
|Due from related parties                                                                |                                                                             |                                     | 15,375    |                   |    
|Prepaid expenses and other                                                              |                                                                             |                                     | 15,442    |                   |    
|Inventories                                                                             |                                                                             |                                     | 29,338    |                   |    
|                                                                                        |                                                                             |                                     |           |                   |    
|Total current assets                                                                    |                                                                             |                                     | 170,796   |                   |    
|Property, plant and equipment, net of accumulated depreciation of $156,595 and $155,582 |                                                                             |                                     | 983,796   |                   |    
|Investments                                                                             |                                                                             |                                     | 124,667   |                   |    
|Goodwill                                                                                |                                                                             |                                     | 64,992    |                   |    
|Other assets                                                                            |                                                                             |                                     | 20,014    |                   |    
|                                                                                        |                                                                             |                                     |           |                   |    
|                                                                                        |                                                                             | $                                   | 1,364,265 |                   | $  
|                                                                                        |                                                                             |                                     |           |                   |    
|Liabilities and Shareholders' Equity                                                    |                                                                             |                                     |           |                   |    
|Working capital facilities                                                              |                                                                             | $                                   | 49,885    |                   | $  
|Accounts payable                                                                        |                                                                             |                                     | 23,066    |                   |    
|Due to related parties                                                                  |                                                                             |                                     | 5,830     |                   |    
|Accrued liabilities                                                                     |                                                                             |                                     | 48,572    |                   |    
|Deferred revenue                                                                        |                                                                             |                                     | 25,733    |                   |    
|Current portion of long-term debt and capital leases                                    |                                                                             |                                     | 55,727    |                   |    
|                                                                                        |                                                                             |                                     |           |                   |    
|Total current liabilities                                                               |                                                                             |                                     | 208,813   |                   |    
|Long-term debt and obligations under capital leases                                     |                                                                             |                                     | 488,221   |                   |    
|Deferred income taxes                                                                   |                                                                             |                                     | 13,130    |                   |    
|                                                                                        |                                                                             |                                     |           |                   |    
|                                                                                        |                                                                             |                                     | 710,164   |                   |    
|                                                                                        |                                                                             |                                     |           |                   |    
|Minority interest                                                                       |                                                                             |                                     | 4,421     |                   |    
|                                                                                        |                                                                             |                                     |           |                   |    
|Shareholders' equity:                                                                   |                                                                             |                                     |           |                   |    
|                                                                                        | Preferred shares $0.01 par value (30,000,000 shares authorized, issued nil) |                                     |           |                  |    
|                                                                                        | Class A common shares $0.01 par value (120,000,000 shares authorized):      |                                     |           |                   |    
|                                                                                        |                                                                             | Issued36,840,601 (200431,790,601) |           |                   | 368
|                                                                                        | Class B common shares $0.01 par value (120,000,000 shares authorized):      |                                     |           |                   |    
|                                                                                        |                                                                             | Issued20,503,877                   |           |                   | 205
|Additional paid-in capital                                                              |                                                                             |                                     | 402,350   |                   |    
|Retained earnings                                                                       |                                                                             |                                     | 274,868   |                   |    
|Accumulated other comprehensive loss                                                    |                                                                             |                                     | (27,930   | )                 |    
|Less: reduction due to Class B common shares owned by a subsidiary18,044,478           |                                                                             |                                     | (181      | )                 |    
|                                                                                        |                                                                             |                                     |           |                   |    
|Total shareholders' equity                                                              |                                                                             |                                     | 649,680   |                   |    
|                                                                                        |                                                                             |                                     |           |                   |    
|Commitments and contingencies                                                           |                                                                             |                                     |           |                   |    
|                                                                                        |                                                                             |                                     |           |                   |    
|                                                                                        |                                                                             | $                                   | 1,364,265 |                   | $  
|                                                                                        |                                                                             |                                     |           |                   |    

See notes to consolidated financial statements.

2

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

|                                                     |                                     | Three months ended March 31, |       
|---------------------------------------------------- | ----------------------------------- | ---------------------------- | ------
|
|
|Revenue                                              |                                     | $                            | 80,489
|                                                     |                                     |                              |       
|Expenses:                                            |                                     |                              |       
|                                                     | Depreciation and amortization       |                              |       
|                                                     | Operating                           |                              |       
|                                                     | Selling, general and administrative |                              |       
|                                                     |                                     |                              |       
|Total expenses                                       |                                     |                              | 80,570
|                                                     |                                     |                              |       
|Losses from operations before net finance costs      |                                     |                              | (81   
|Interest expense, net                                |                                     |                              | (7,079
|Interest and related income                          |                                     |                              | 3,580 
|                                                     |                                     |                              |       
|Net finance costs                                    |                                     |                              | (3,499
|                                                     |                                     |                              |       
|Losses before income taxes                           |                                     |                              | (3,580
|Benefit from income taxes                            |                                     |                              | 298   
|                                                     |                                     |                              |       
|Losses before earnings from unconsolidated companies |                                     |                              | (3,282
|Earnings from unconsolidated companies, net of tax   |                                     |                              | 1,725 
|                                                     |                                     |                              |       
|Net losses on class A and class B common shares      |                                     | $                            | (1,557
|                                                     |                                     |                              |       
|Net losses 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 consolidated financial statements.

3

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

|                                                             |                                                                                   | Three months ended March 31,                                                      |                                                               
|------------------------------------------------------------ | --------------------------------------------------------------------------------- | --------------------------------------------------------------------------------- | --------------------------------------------------------------
|
|
|Cash flows from operating activities:                        |                                                                                   |                                                                                   |                                                               
|                                                             | Net losses                                                                        |                                                                                   | $                                                             
|                                                             |                                                                                   |                                                                                   |                                                               
|                                                             | Adjustments to reconcile net losses 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 and deferred revenue
|                                                             |                                                                                   |                                                                                   |                                                               
|                                                             |                                                                                   | Total adjustments                                                                 |                                                               
|                                                             |                                                                                   |                                                                                   |                                                               
|Net cash provided by operating activities                    |                                                                                   |                                                                                   | 2,226                                                         
|                                                             |                                                                                   |                                                                                   |                                                               
|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                        |                                                                                   |                                                                                   | (115,708                                                      
|                                                             |                                                                                   |                                                                                   |                                                               
|Cash flows from financing activities:                        |                                                                                   |                                                                                   |                                                               
|                                                             | Net (repayment)/proceeds from working capital facilities and redrawable loans     |                                                                                   |                                                               
|                                                             | Issuance of common shares                                                         |                                                                                   |                                                               
|                                                             | Issuance of long-term debt                                                        |                                                                                   |                                                               
|                                                             | Principal payments under long-term debt                                           |                                                                                   |                                                               
|                                                             | Payment of common share dividends                                                 |                                                                                   |                                                               
|                                                             |                                                                                   |                                                                                   |                                                               
|Net cash provided by (used in) financing activities          |                                                                                   |                                                                                   | 98,314                                                        
|                                                             |                                                                                   |                                                                                   |                                                               
|Effect of exchange rate changes on cash and cash equivalents |                                                                                   |                                                                                   | (1,072                                                        
|                                                             |                                                                                   |                                                                                   |                                                               
|Net decrease in cash and cash equivalents                    |                                                                                   |                                                                                   | (16,240                                                       
|Cash and cash equivalents at beginning of period             |                                                                                   |                                                                                   | 85,610                                                        
|                                                             |                                                                                   |                                                                                   |                                                               
|Cash and cash equivalents at end of period                   |                                                                                   | $                                                                                 | 69,370                                                        
|                                                             |                                                                                   |                                                                                   |                                                               

See
notes to consolidated financial statements.

4

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

|                                                                            |                                            | 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, 2005                                                    |                                            | $                             |  |                                    | $ | 318                                |   | $                          | 205 |                   | $ | 280,212                              |   | $                                 | 277,281 |                                   | $
|Issuance of Class A common shares in public offering, net of issuance costs |                                            |                               |  |                                    |   | 50                                 |   |                            |    |                   |   | 121,877                              |   |                                   |        |                                   |  
|Stock-based compensation                                                    |                                            |                               |  |                                    |   |                                   |   |                            |    |                   |   | 261                                  |   |                                   |        |                                   |  
|Dividends on common shares                                                  |                                            |                               |  |                                    |   |                                   |   |                            |    |                   |   |                                     |   |                                   | (856    | )                                 |  
|Comprehensive loss:                                                         |                                            |                               |   |                                    |   |                                    |   |                            |     |                   |   |                                      |   |                                   |         |                                   |  
|                                                                            | Net losses on common shares for the period |                               |   |                                   |   |                                    |  |                            |     |                  |   |                                      |  |                                   |         | (1,557                            | )
|                                                                            | Other comprehensive loss                   |                               |   |                                   |   |                                    |  |                            |     |                  |   |                                      |  |                                   |         |                                  |  
|                                                                            |                                            |                               |   |                                    |   |                                    |   |                            |     |                   |   |                                      |   |                                   |         |                                   |  
|                                                                            |                                            |                               |   |                                    |   |                                    |   |                            |     |                   |   |                                      |   |                                   |         |                                   |  
|                                                                            |                                            |                               |   |                                    |   |                                    |   |                            |     |                   |   |                                      |   |                                   |         |                                   |  
|Balance, March 31, 2005                                                     |                                            | $                             |  |                                    | $ | 368                                |   | $                          | 205 |                   | $ | 402,350                              |   | $                                 | 274,868 |                                   | $
|                                                                            |                                            |                               |   |                                    |   |                                    |   |                            |     |                   |   |                                      |   |                                   |         |                                   |  

See
notes to consolidated financial statements.

5

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Orient-Express Hotels Ltd. and Subsidiaries  Notes to 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
March 31, 2005, Sea Containers Ltd., a Bermuda company ("SCL"), owned 25% of the equity shares in the Company.

(a) Accounting policies

For a description of significant accounting policies and basis of presentation, see Notes 1 and 15 to the consolidated financial statements in the Company's 2004
Form 10-K annual report. As of March 31, 2005, these significant accounting policies have not changed from December 31, 2004, except as referred to in Note 1(c)
below. "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 months ended March 31, 2005 and 2004, 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 the interim period are not necessarily indicative of a
full year's operating results.

(b) Net losses per share

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

Three months ended March 31,2005

2004Basic

34,762

34,250Effect of dilution



Diluted

34,762

34,250


For
the three months ended March 31, 2005 and 2004, the anti-dilutive effect of stock options on 269,312 and 102,261 class A common shares, respectively, was
excluded from the computation of diluted losses per share.

(c) Stock-based compensation

OEH had previously accounted for stock-based compensation under the guidelines of Accounting Principles Board Opinion No. 25, "Accounting for Stock Issued
to Employees", and followed the disclosure-only provisions of SFAS No. 123, "Accounting for Stock-Based Compensation" as amended by SFAS No. 148, "Accounting for Stock-Based
CompensationTransition and Disclosure".

With
effect from January 1, 2005, the Company adopted SFAS No. 123R, "Stock-Based Payment", and chose the modified prospective application as its chosen transition method.
Prior to January 1, 2005, the Company has historically reflected the pro forma impact to net income had all stock-based compensation been expensed under the provisions of
SFAS No. 123. Upon adoption of SFAS No. 123R, all stock-based compensation vesting during the three months ended March 31, 2005 has been reflected in the Company's net
loss, as reported for this period. This resulted in an expense in the three months

6

---



ended
March 31, 2005 of $261,000. Awards granted in future periods will be valued on the date of grant and expensed using a straight-line basis over the required service period. The following
table illustrates the effect on income attributable to common shares and earnings per share for the three months ended March 31, 2004, had the fair-value based provisions of SFAS
No. 123R been applied (dollars in thousands except per share amounts):

Three months
ended
March 31,
2004Net loss as reported

$
(4,606
)Add:Stock-based compensation expense included in reported net income, net of related tax effects


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


(187
)Pro forma

$
(4,793
)Basic and diluted losses per share:As reported:Basic and diluted

$
(0.13
)Pro forma:Basic and diluted

$
(0.14
)


(d) Dividends

On January 5, 2005, the Company declared a dividend of $0.025 per common share payable February 4, 2005 to shareholders of record January 20,
2005.

(e) Earnings from unconsolidated companies

Earnings from unconsolidated companies 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 $2,188,000 and $1,929,000 for the three months ended March 31, 2005 and 2004, respectively.

(f) Recent accounting pronouncements

The Company adopted SFAS No. 123R with effect from January 1, 2005 (see Note 1(c)).

(g) Reclassifications

Certain items in 2004 have been reclassified to conform to the 2005 presentation.

2.     Acquisitions

Effective February 8, 2005, OEH purchased 100% of the issued equity of LLC Europe Hotel which owns a 93.5% interest in the property operating as the Grand
Hotel Europe, St Petersburg, Russia. The remaining interest in the property is owned by the City of St. Petersburg. In addition, OEH acquired full management and operational control of the hotel and
acquired 100% of a Cyprus company which has agreements with the hotel to provide various management services. The total purchase price, including acquisition costs, was $95,000,000 paid in cash of
which $57,500,000 was financed by a syndicate of banks led by the International Finance Corporation.

7

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The
following table summarizes the initial estimated fair values of the assets acquired and liabilities assumed at the date of acquisition. These initial purchase price allocations may
be adjusted within one year of the purchase date for changes in estimates of the fair value of assets acquired and liabilities assumed as a result of final appraisals (dollars in thousands):

March 31, 2005Current assets

$
2,740Property, plant and fixtures and fittings


71,752Goodwill


37,000Total assets acquired


111,492Current liabilities


3,992Deferred income taxes


12,500Total liabilities assumed


16,492Net assets acquired

$
95,000


The
net assets of the Grand Hotel Europe have been fair valued based on the estimated replacement cost of the building. After fair valuing all other assets and liabilities, goodwill of
$37,000,000 has been recorded of which $ nil will be deductible as operating expenses for tax purposes.

The
acquisition of the Grand Hotel Europe has been accounted for as a purchase in accordance with SFAS No. 141, "Business Combinations". The results of the operation have been
included in the consolidated financial statements of OEH from February 8, 2005.

3.     Investments

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 March 31, 2005,
OEH had provided $4,625,000 (December 31, 2004-$4,625,000) in loans in Pansea which are recorded in other assets. The conversion price of the loans is determined at a multiple of
EBITDA less existing debt on the exercise date (as defined in the investment agreement). OEH is not managing the hotels but is marketing them along with its other properties.

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):

March 31,
2005

December 31,
2004Current assets

$
40,781

$
39,993Property, plant and equipment, net


349,754


357,949Other assets


5,144


5,469Total assets

$
395,679

$
403,411Current liabilities

$
43,065

$
41,290Long-term debt


211,840


216,251Other liabilities


79,969


79,403Total shareholders' equity


60,805


66,467Total liabilities and shareholders' equity

$
395,679

$
403,411


8

---



Three months ended March 31,2005

2004Revenue

$
33,814

$
28,652Earnings from operations before net finance costs

$
2,320

$
2,288Net losses

$
(3,231
)
$
(1,867
)


4.     Property, plant and equipment

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

March 31,
2005

December 31,
2004Freehold and leased land and buildings

$
839,231

$
769,951Machinery and equipment


149,226


149,191Fixtures, fittings and office equipment


133,663


134,935River cruiseship and canalboats


18,271


18,3161,140,391


1,072,393Less: accumulated depreciation


(156,595
)

(155,582
)$
983,796

$
916,811


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

March 31,
2005

December 31,
2004Land and buildings

$
14,096

$
14,612Machinery and equipment


2,270


2,410Fixtures, fittings and office equipment


4,892


4,88621,258


21,908Less: accumulated depreciation


(2,726
)

(2,591
)$
18,532

$
19,317


5.     Goodwill

OEH's goodwill consists of $788,000 related to the trains and cruises reporting segment and $64,204,000 related to the hotels and restaurants reporting segment,
of which $37,000,000 relates to the acquisition of the Grand Hotel Europe effective February 8, 2005 (see Note 2).

9

---



6.     Long-term debt and obligations under capital lease

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

March 31,
2005

December 31,
2004Loans from banks collateralized by property, plant and equipment payable over periods of 1 to 11 years, with a weighted average interest rate of 4.80% and 4.18%, respectively, primarily based on LIBOR

$
528,771

$
567,012Obligations under capital lease


15,177


16,694543,948


583,706Less: current portion


55,727


46,245$
488,221

$
537,461


Certain
credit agreements of OEH have restrictive covenants. At March 31, 2005, OEH was in compliance with these covenants, including a minimum consolidated net worth test and a
minimum consolidated interest coverage test as defined under a bank-syndicated $179,000,000 loan facility borrowed during 2003 and secured by three of OEH's Italian hotels. OEH does not
currently have any covenants in its loan agreements which limit the payment of dividends.

The
following is a summary of the aggregate maturities of long-term debt, including obligations under capital lease, at March 31, 2005 (dollars in thousands):

Year ending December 31,2006

$
94,9252007


119,6322008


128,8012009


64,62720010 and thereafter


80,236$
488,221


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.

10

---



7.     Income taxes

The benefit from income taxes consists of the following (dollars in thousands):

Three months ended March 31, 2005

Current

Deferred

TotalUnited States

$
321

$
653

$
974Other foreign


1,552


(2,824
)

(1,272
)$
1,873

$
(2,171

$
(298
)


Three months ended March 31, 2004

Current

Deferred

TotalUnited States

$
176

$
185

$
361Other foreign


914


(2,287
)

(1,373
)$
1,090

$
(2,102
)
$
(1,012
)


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):

March 31,
2005

December 31,
2004Gross deferred tax assets

$
67,499

$
64,493Less: Valuation allowance


(32,831
)

(31,996
)Net deferred tax assets


34,668


32,497Deferred tax liabilities


(47,798
)

(35,207
)Net deferred tax liabilities

$
(13,130
)
$
(2,710
)


The
deferred tax assets consist of tax loss carry forwards. 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. The deferred tax liabilities at March 31, 2005 include a liability of $12,500,000 arising from the investment in the Grand Hotel
Europe (see Note 2). The liability is caused by the difference between the tax basis and the fair value of the depreciable assets at the acquisition date.

8.     Pensions

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

Three months ended March 31,

2005

2004Service cost

$
229

$
208Interest cost


181


97Expected return on plan assets


138


(110
)Amortization of net loss


66


35Net periodic benefit cost

$
338

$
230


As
reported in Note 7 to the financial statements in the Company's 2004 Form 10-K annual report, OEH expected to contribute $833,000 to its
pension plans in 2005. As of March 31, 2005, $248,000 of

11

---



contributions
were made. OEH anticipates contributing an additional $585,000 to fund its pension plans in 2005 for a total of $833,000.

9.     Supplemental cash flow information

(Dollars in thousands):

Three months ended March 31,

2005

2004Cash paid for:Interest

$
7,217

$
5,537Income taxes

$
1,340

$
1,247


In
conjunction with acquisitions (see Note 2) liabilities were assumed as follows (dollars in thousands):

Three months ended March 31,

2005

2004Fair value of assets acquired

$
111,492

$
30,146Cash paid


(95,000
)

(29,670
)Liabilities assumed

$
16,492

$
476


10.   Accumulated other comprehensive loss

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

March 31,
2005

December 31,
2004Foreign currency translation adjustments

$
(27,671
)
$
(12,636
)Net change on derivative financial instruments


(259
)

(209
)$
(27,930
)
$
(12,845
)


For
the three months ended March 31, 2005 and 2004, the change in the fair market value of derivative instruments resulted in a charge of $50,000 and $260,000,
respectively, to comprehensive loss.

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

Three months ended March 31,

2005

2004Net losses on common shares

$
(1,557
)
$
(4,606
)Foreign currency translation adjustments


(15,035
)

3,165Change in fair value of derivatives


(50
)

(260
)Comprehensive loss

$
(16,642
)
$
(1,701
)


11.   Commitments

Outstanding contracts to purchase fixed assets were approximately $26,900,000 at March 31, 2005 (December 31, 2004$27,200,000).

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

As reported in the Company's 2004 Form 10-K annual report, OEH has two reporting segments, (i) hotels and restaurants and
(ii) tourist trains and cruises. Segment performance is evaluated based upon segment net earnings before interest, tax (including tax on earnings from unconsolidated

12

---



companies),
depreciation and amortisation ("segment EBITDA"). 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):

Three months ended March 31,

2005

2004Revenue:Hotels and restaurantsOwned hotelsEurope

$
16,787

$
11,836North America


23,493


19,489Rest of world


25,201


20,072Hotel management/part ownership interests


1,819


1,323Restaurants


5,189


4,58972,489


57,309Tourist trains and cruises


8,000


6,525$
80,489

$
63,834Depreciation and amortizationHotels and restaurantsOwner hotelsEurope

$
2,930

$
2,418North America


1,702


1,545Rest of world


2,096


1,961Restaurants


220


1956,948


6,119Tourist trains and cruises


870


836$
7,818

$
6,955Segment EBITDAOwned hotelsEurope

$
(3,124
)
$
(3,128
)North America


6,158


4,301Rest of world


7,094


5,592Hotel management/part ownership interests


2,927


2,917Restaurants


1,012


698Tourist trains and cruises


(108
)

(256
)Central overheads


(4,497
)

(3,807
)$
9,462

$
6,317Segment EBITDA/net losses reconciliation:Segment EBITDA

$
9,462

$
6,317Less:Depreciation and amortization


7,818


6,955Net finance costs


3,499


4,980Benefit from income taxes


(298
)

(1,012
)Share of provision for income taxes of unconsolidated companies





Net losses

$
(1,557
)
$
(4,606
)Earnings from unconsolidated companies:Hotels and restaurantsHotel management/part ownership interests

$
1,108

$
1,594Restaurants


53


1031,161


1,697Tourist trains and cruises


564


598$
1,725

$
2,295Capital ExpenditureOwned hotelsEurope

$
12,695

$
7,521North America


5,717


2,455Rest of world


3,624


3,235Hotel management/part ownership interests





Restaurants


162


109Tourist trains and cruises


1,039


444$
23,237

$
13,764


13

---



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

Three months ended March 31,

2005

2004Revenue:Europe

$
22,742

$
17,136North America


29,146


24,615Rest of world


28,601


22,083$
80,489

$
63,834


13.   Related party transactions

For the three months ended March 31, 2005, OEH paid subsidiaries of SCL $1,523,000 (2004$1,369,000) for the provision of various services
under a services agreement between OEH and SCL. These amounts have been settled in accordance with the 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 three months
ended March 31, 2005, OEH earned $936,000 (2004$860,000) in management fees which are recorded in revenue, and $2,188,000 (2004$1,929,000) in interest income on
partnership and other loans, which are recorded in earnings from unconsolidated companies.

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 three months ended March 31, 2005, OEH earned management and
guarantee fees of $894,000 (2004$451,000) and loan interest of $29,000 (2004$24,000) which are recorded in earnings from unconsolidated companies. At March 31, 2005,
loans to the hotels aggregated $2,000,000, bear interest at a spread over LIBOR and come 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 owns a 50% interest and is accounted for under the equity method. For the three months
ended March 31, 2005, OEH earned $241,000 (2004$178,000) in management fees, which are included in revenue.

14

---



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

Results of Operations

OEH's operating results for the three months ended March 31, 2005 and 2004, expressed as a percentage of revenue, were as follows:

Three months ended March 312005

2004%

%Revenue:Hotels and restaurants

90

90Tourist trains and cruises

10

10100

100Expenses:Depreciation and amortization

10

11Operating

51

53Selling, general and administrative

39

41Net finance costs

4

8Losses before income taxes

(4
)
(13
)Benefit from income taxes



2Earnings from unconsolidated companies

2

4Net losses as a percentage of total revenue

(2
)
(7
)


Segment
net earnings before interest, tax (including tax on unconsolidated companies), depreciation and amortization ("segment EBITDA") of OEH's operations for the three months ended
March 31, 2005 and 2004 are analyzed as follows (dollars in millions):

Three months ended March 312005

2004Segment EBITDA:Owned hotels:Europe

$
(3.1
)
$
(3.1
)North America


6.2


4.3Rest of the world


7.1


5.6Hotel management interests


2.9


2.9Restaurants


1.0


0.7Tourist trains and cruises


(0.1
)

(0.3
)Central overheads


(4.5
)

(3.8
)Total segment EBITDA

$
9.5

$
6.3


15

---



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

Three months ended
March 312005

2004Segment net losses

$
(1.6
)
$
(4.6
)Add:Depreciation and amortization


7.9


6.9Net finance costs


3.5


5.0Benefit from income taxes


(0.3
)

(1.0
)Share of provision for income taxes of unconsolidated companies





Segment EBITDA

$
9.5

$
6.3


Management
evaluates the operating performance of OEH's segments on the basis of segment EBITDA and believes that segment EBITDA is a useful measure of operating performance because
segment EBITDA is not affected by non-operating factors such as leverage and the historic cost of assets. EBITDA is a financial measure commonly used in OEH's industry. OEH's segment
EBITDA, however, may not be comparable in all instances to EBITDA as disclosed by other companies. Segment EBITDA should not be considered as an alternative to earnings from operations or net earnings
(as determined in accordance with U.S. generally accepted accounting principles) as a measure of OEH's operating performance, or as an alternative to net cash provided by operating, investing and
financing activities (as determined in accordance with U.S. generally accepted accounting principles) as a measure of OEH's ability to meet cash needs.

16

---



Operating
information for OEH's owned hotels for the three months ended March 31, 2005 and 2004 is as follows:

Three months ended
March 312005

2004Average Daily Rate (in dollars)Europe

365

383North America

386

379Rest of the world

305

255Worldwide

346

320Rooms Sold (in thousands)Europe

23

16North America

39

34Rest of the world

50

47Worldwide

112

97RevPAR (in dollars)Europe

162

173North America

254

243Rest of the world

187

145Worldwide

201

182Change %Dollars

Local CurrencySame Store RevPAR (in dollars)Europe

184

171

7
%
3
%North America

274

243

13
%
13
%Rest of the world

191

151

27
%
20
%Worldwide

218

186

17
%
14
%


Average
daily rate is the average amount achieved for the rooms sold. RevPAR is revenue per available room, that is rooms 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.

Three Months Ended March 31, 2005 Compared To Three Months Ended March 31, 2004

Overview

The net loss for the period was $1.6 million ($0.04 per common share) on revenue of $80.5 million, compared with a net loss of $4.6 million
($0.13 per common share) on revenue of $63.8 million in the prior year first quarter. The first quarter is a traditional loss-making period because a number of OEH's properties are
closed for the winter, the Venice Simplon-Orient-Express train does not operate and tourist arrivals are low in locations with poor winter weather. In addition, in this year's first quarter La
Residencia in Mallorca, Spain and the Miraflores in Lima, Peru were closed for major renovation. Losses from euro-bloc properties translated into more U.S. dollars than in the prior year
because of further weakness of the U.S. dollar against the euro, although this effect is expected to reverse in the remainder of the year which is profitable.

17

---



Revenue

Total revenue increased by $16.7 million, or 26%, from $63.8 million in the three months ended March 31, 2004 to $80.5 million in the
three months ended March 31, 2005. Hotels and restaurants revenue increased by $15.2 million, or 26%, from $57.3 million in the three months ended March 31, 2004
to $72.5 million in the three months ended March 31, 2005, and tourist trains and cruises increased by $1.5 million, or 23%, from $6.5 million for the three months ended
March 31, 2004 to $8.0 million for the three months ended March 31, 2005.

The
increase for hotels and restaurants was mainly due to an increase at OEH's owned hotels of $14.1 million, or 27%, from $51.4 million in the three months ended
March 31, 2004 to $65.5 million in the three months ended March 31, 2005. The revenue from restaurants increased by $0.6 million, or 13%, from $4.6 million in the
three months ended March 31, 2004 to $5.2 million in the three months ended March 31, 2005 which was mainly due to the '21' Club in New York which has seen improvements in its
banqueting business following increased corporate entertainment activity.

For
owned hotels overall, same store RevPAR in U.S. dollars increased by 17% in the three months ending March 31, 2005 compared to the three months ending March 31, 2004.
Measured in local currencies this increase was 14%, of which around 10% was due to improved occupancy and 4% to higher achieved daily rate.

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

Europe.Revenue increased by $5.0 million, or 42%, from $11.8 million for the three months ended
March 31, 2004 to $16.8 million for the three months ended March 31, 2005. This increase included revenue from the Grand Hotel Europe, St Petersburg, which was acquired on
February 8, 2005. The revenue from the hotel between this date and March 31, 2005 was $3.2 million. Excluding the revenue from the Grand Hotel Europe, revenue increased by
$1.8 million, or 15%, from $11.8 million for the three months ended March 31, 2004 to $13.6 million for the three months ended March 31, 2005. During the period La
Residencia in Mallorca was closed for construction works.

On
a same store basis, excluding the above, RevPAR in local currency increased by 3%, but in U.S. dollars this translated into an increase of 7% as the euro was stronger against the
dollar in the first quarter of 2005 compared to the first quarter of 2004.

North America.Revenue increased by $4.0 million, or 21%, from $19.5 million in the three months ended
March 31, 2004 to $23.5 million in the three months ended March 31, 2005. This increase included revenue from El Encanto which was acquired on November 1, 2004. The revenue
from this hotel in the first quarter of 2005 was $1.3 million. Excluding revenue from El Encanto, revenue increased by $2.7 million, or 14%, from $19.5 million for the three
months ended March 31, 2004 to $22.2 million for the three months ended March 31, 2005.

On
a same store basis, RevPAR increased by 13% which was driven by approximately a 10% increase in occupancy and a 3% improvement in achieved average daily rate.

Rest of the World.Revenue increased by $5.1 million, or 26%, from $20.0 million in the three months ended
March 31, 2004 to $25.2 million in the three months ended March 31, 2005. During the period the Miraflores in Lima, Peru was closed for refurbishment. In the same period last
year, revenue from this hotel was $1.2 million.

The
RevPAR on a same store basis for the rest of the world region increased by 20% in local currencies in the three months ended March 31, 2005 compared to the three months ended
March 31, 2004. Approximately 15% of this increase was due to increased occupancies at the hotels and the rest was due to a higher achieved average daily rate. This RevPAR increase in local
currencies translated to

18

---



a
22% increase when expressed in U.S. dollars primarily as the South African rand and Australian dollar were stronger against the U.S. dollar in the period over the comparable period of 2004.

Depreciation and amortization

Depreciation and amortization increased by $0.9 million, or 12%, from $7.0 million in the three months ended March 31, 2004 to
$7.8 million in the three months ended March 31, 2005, primarily due to the effect of acquisitions and capital expenditures in 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 $7.5 million, or 22%, from $33.8 million in the three months ended March 31, 2004 to $41.3 million in
the three months ended March 31, 2005, mainly due to the effect of the weakness of the U.S. dollar against currencies in which OEH incurs operating expenses, increased occupancies at the hotels
and acquisition of additional hotels in 2004 and 2005.

Selling, general and administrative expenses

Selling, general and administrative expenses increased by $5.4 million, or 21%, from $26.0 million in the three months ended March 31, 2004
to $31.4 million in the three months ended March 31, 2005, mainly
due to the effect of the weakness of the U.S. dollar against currencies in which OEH incurs these expenses and acquisitions of additional hotels in 2004 and 2005.

Earnings (losses) from operations before net finance costs

Losses from operations reduced by $3.0 million from losses of $2.9 million in the three months ended March 31, 2004 to earnings of
$0.1 million in the three months ended March 31, 2005, due to the factors described in the overview above.

Net finance costs

Net finance costs reduced by $1.5 million, or 30%, from $5.0 million for the three months ended March 31, 2004 to $3.5 million for the
three months ended March 31, 2005, which included a foreign exchange gain of $3.6 million. Excluding this gain, net finance costs increased by $2.1 million, or 42%, from
$5.0 million for the three months ended March 31, 2004 to $7.1 million for the three months ended March 31, 2005.

Benefit from income taxes

The benefit from income taxes reduced by $0.7 million, from a benefit of $1.0 million in the three months ended March 31, 2004 to a benefit
of $0.3 million in the three months ended March 31, 2005. The Company is incorporated in Bermuda, which does not impose an income tax. Accordingly, the entire income tax benefit was
attributable to income tax credits incurred by subsidiaries operating in jurisdictions that impose an income tax. The reduced benefit was mainly due to the increased profitability or reduced seasonal
losses of some of these subsidiaries.

Earnings from unconsolidated companies

Earnings from unconsolidated companies reduced by $0.6 million, or 25%, from $2.3 million in the three months ended March 31, 2004 to
$1.7 million in the three months ended March 31, 2005. This was mainly due to lower earnings from OEH's investment in the Ritz, Madrid due to poor market demand in Madrid.

19

---



Liquidity and Capital Resources

Working Capital

OEH had cash and cash equivalents of $69.4 million at March 31, 2005, $16.2 million less than the $85.6 million at December 31,
2004. At March 31, 2005, the undrawn amounts available to OEH under its short-term lines of credit were $5.2 million. In addition, at March 31, 2005 there were undrawn
amounts committed under long-term facilities of $91.0 million. OEH's total cash and availability at March 31, 2005 was, therefore, $165.6 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 $38.0 million at March 31,
2005, a decrease in the working capital of $38.0 million from a balance of zero at December 31, 2004. 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.

Cash Flow

Operating Activities.Net cash provided by operating activities increased by $1.5 million from $0.7 million
cash surplus for the three months ended March 31, 2004 to $2.2 million for the three months ended March 31, 2005.

Investing Activities.Cash used in investing activities increased by $98.4 million to $115.7 million for the
three months ended March 31, 2005, compared to $17.3 million for the three months ended March 31, 2004. This was mainly due to the acquisition of the Grand Hotel Europe on
February 8, 2005.

Financing Activities.Cash provided by financing activities for the three months ended March 31, 2005 was
$98.3 million compared to cash used in financing activities of $6.2 million for the three months ended March 31, 2004, an increase of $104.5 million. In the three months
ended March 31, 2005, OEH had proceeds from borrowings under long-term debt of $74.7 million which included $58.5 million of finance on the Grand Hotel Europe
acquisition, compared to proceeds of $0.1 million for the three months ended March 31, 2004. In the three months ended March 31, 2005, OEH had net proceeds from the issuance of
common shares of $122.0 million, which were primarily used to pay down a revolving credit facility secured on OEH's Italian hotels ($91.0 million) with the balance going to cash to be
used for general corporate purposes including acquisitions and investments.

Capital Commitments.There were $26.9 million of capital commitments outstanding as of March 31, 2005 mainly on
investments in owned hotels.

Indebtedness

At March 31, 2005, OEH had $543.9 million of long-term debt secured by assets ($474.6 million net of cash), including the current
portion, which is repayable over periods of 1 to 11 years with a

20

---



weighted
average interest rate of 4.8%.See Note 6 to the financial statements regarding the maturity of long-term debt.

Approximately
39% of the outstanding principal was drawn in European euros and the balance primarily in U.S. dollars. At March 31, 2005, 98% of borrowings of OEH were in floating
interest rates.

Liquidity

OEH raised $122.0 million from the issue and sale of 5.05 million class A common shares during the quarter as referred to above.

Including
these proceeds from the issue and sale of shares, 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 for the foreseeable future.

Recent Accounting Pronouncements

The Company has adopted SFAS No. 123R, "Share-Based Payment", effective January 1, 2005 and has chosen the modified prospective application as its
transition method. This resulted in an expense of $261,000 in the three months ended March 31, 2005 relating to the amortization of the fair value of options granted prior to January 1,
2005. The expected expense in future periods on the outstanding non-vested share options granted prior to January 1, 2005 is as follows at March 31, 2005 (dollars in
thousands):

Year ended December 31,Remainder of 2005

$
7842006


3882007


149


The
Company made no modifications to outstanding share options prior to the adoption of SFAS No. 123R and has applied the valuation methodology and assumptions previously used to
calculate the pro-forma fair value of options granted as required under SFAS No. 123, "Accounting for Stock-Based Compensation", in adopting SFAS No. 123R. These are set out
in more detail in Note 11 to the financial statements in the Company's 2004 Form 10-K annual report. The Company expects that these assumptions will continue to be
appropriate in fair valuing options granted in the future. The expected life of the options assumption may change over time. Currently the earliest grants to be awarded were made less than five years
ago.

The
Company has made no change to the quantity, types or terms of instruments used in its share-based payment programs.

As
of March 31, 2005, the Company's significant accounting policies and estimates, which are described in Notes 1 and 15 to the financial statements in the Company's 2004
Form 10-K annual report, have not changed from December 31, 2004 other than the change described above.

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 2004
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

21

---



on
consolidated earnings and cash flows. OEH does not hold market rate sensitive financial instruments for trading purposes.

The
market risk relating to interest rates arises mainly from the financing activities of OEH. Earnings are affected by changes in interest rates on borrowings, principally based on U.S.
dollar LIBOR and EURIBOR, and on short-term cash investments. If interest rates increased by 10%, with all other variables held constant, annual net finance costs of OEH would have
increased by approximately $2,600,000 on an annual basis based on borrowings at March 31, 2005. 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 three months of 2005 from those described in the Company's 2004
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 March 31, 2005 and found no material 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 first quarter of 2005 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
such as prevention and detection of misstatement. In addition, the design of any control system is based in part upon certain assumptions about the likelihood of future events. Controls may become
inadequate because of changes in conditions, or the degree of compliance with policies or procedures may deteriorate, for
example. 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.

22

---





PART IIOTHER INFORMATION

ITEM 6. Exhibits

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

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:
May 10, 2005

23

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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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