Future plans

  The integrated resort concept of Laguna Phuket has proved a winning
  formula since the resort’s inception over a decade ago. The dynamic
  development of the resort over the past dozen years has created the
  mature resort which is evident today.

  Nevertheless there continues to be opportunity to improve
  profitability and expand the existing facilities, particularly in
  light of the ongoing high demand for Phuket and a hotel supply which
  is not expanding very quickly.

  Laguna Phuket is effectively its own macro-market within the broader
  Phuket market and dominates the upper-tier rooms supply of the island.
  In terms of four and five star properties, the only real competition
  comes from the Meridien group (Le Meridien and Le Meridien Yacht
  Club), The Amanpuri, and possibly the Novotel Patong and the Chedi.
  Additionally, the new JW Marriott on Mai Khao Beach which opened at
  the end of 2001 will certainly be included in our competitive set.

Future Expansion

  The ability within the resort to add rooms supply without additional
  expenditure on infrastructure is a feature of the projects at Laguna
  Phuket. At Banyan Tree Phuket where the present public areas will
  comfortably support considerably more rooms than we currently have.
  The new Spa Pool Villas have been well received, and there are plans
  to continue to add new, and even better, villas to this products.

  In 2002 , the Company acquired the assets of Laguna Development
  Company Limited (the Company is a 30% partner in this company) which
  will provide a further 1,146 Rai of contiguous land to Laguna Phuket.
  An integrated residential communityto be called Laguna Village is in
  the planning stages for this site, and our preliminary feasibility
  study indicates that it will be a very profitable new venture for the
  Company.

Property Sales

  One of the hallmarks of Laguna Phuket has been its ongoing ability to
  attract investors to buy from a varied inventory of resort
  accommodation. Whilst activity in this area has certainly changed as a
  result of the economic climate, we continue to see interest in our
  product. Indeed, when hotel revenues have dropped, we see a new level
  of interest in our single family homes, where we deliver a turnkey
  property to the consumer together with many of the advantages of a
  Laguna Phuket address.

Last year we reported the construction of two new ‘spec.’ homes on the
golf course, and we can now report that a high level of interest in this
product and plans are being developed to subdivide more land plots
within Laguna. A new product, Laguna Townhomes, is already showing signs
of success and the first four homes, already pre-sold, are under
construction, with more to follow.

  Allamanda Vacation Club

  In response to the changes in the Property Sales market, we launched
  our own vacation club in 1998 to continue to market remaining property
  inventory. This product is a variation on the theme of timeshare. We
  are conscious of the somewhat difficult reputation of this industry,
  and we are determined to provide a service which reflects the high
  standards and culture of the resort. The Allamanda Vacation Club is
  being well received by guests, and should form an important tool for
  the resort. It is a highly profitable industry, although we anticipate
  continuing with our sales efforts at a slightly slower pace than
  timeshare industry norms, protecting our guests from the traditional
  sales pressure, but nevertheless making the product available to our
  own captive audience.

  The Bangkok office which opened in mid 2000 is now performing very
  well, and we plan to regionalise the Allamanda Vacation Club with
  another sales office in Bintan, Indonesia and a wider inventory of
  product including the Angsana Bintan. The growth potential of this
  business is expected to add considerably to the Company’s future
  profitability.

Laguna Service Company Limited

Laguna Service Company is the central services arm of Laguna Phuket. It
performs a variety of tasks including inter-hotel transportation,
central laundry, landscaping of common areas, beach clean-up, lagoon
maintenance, and water supply in addition to providing a response team
to deal with a variety of emergencies within the resort. LSC is governed
by its own Council which is comprised of the Hotel General Managers. No
significant future developments are planned for this company at present.

  Marketing Laguna Phuket

In addition to the hotels’ own marketing efforts, which accounts for the majority of expenditure in Advertising and Promotion, there is a central fund derived from a 1% levy on the hotels’ rooms revenue. There is a full programme marketing Laguna Phuket as a destination which includes advertising, public relations, and some direct selling activities. 

Our very successful programme called “Laguna Phuket Plus” with selected agents in key feeder markets, is now being promoted year-round, and is expected to be a key feature of Laguna Phuket’s co-operative sales efforts.

Laguna Tours

  Laguna Tours, our centralised tour company is directed at capturing
  the commissions generated by our existing guests when they avail
  themselves of the many activities available on the island. This also
  provides us with the opportunity to exercise some quality control over
  the tours offered to our guests.

Other Business Units

  The other business units at Laguna Phuket continue to thrive. Canal
  Village remains fully booked, and in 2003 we plan to build separate
  offices for the Allamanada Vacation Club, which occupies eight shop
  spaces, to make room for the waiting list of potential tenants. Within
  Canal Village, we are also planning to build a Wedding Chapel in 2003,
  with the intent to penetrate the lucrative weddings market,
  particularly from Japan.

  Quest Laguna Phuket Adventure continues to provide important support
  for our corporate meetings market, and an additional leisure feature
  for our guests.

  The Laguna Phuket Golf Club is an important amenity for Laguna Phuket.
  The name has now finally been changed from Banyan Tree Golf Club to
  help identify this facility with all the hotels of Laguna Phuket.

  Banyan Tree Gallery captures valuable retail spending by our guests
  for the Company, and provides a consistent product in logo-wear
  throughout the resort.

  LRH Cashflow

The excellent performance of the hotel and property sales operations
over recent years has enabled LRH to generate significant cash from its
operations. Given the significant margins between the loan and deposit
interest rates we have largely used the cash generated to accelerate our
debt repayments. At 31 December 2002 this has resulted in LRH having a
particularly manageable level of bank loans, and accordingly a very
strong balance sheet. As we go forward, this cash rich position and our
ability to obtain external finance due to our strong balance sheet, will
enable us to take advantage of opportunities and developments in order
that the Company continues to increase the return to its shareholders.