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. Firstly at Banyan Tree Phuket where the present public areas
  will comfortably support considerably more rooms than we currently
  have. Construction of an additional fourteen villas on the site known
  as the “City Marker” site (due to the existence of this historical
  monument on the site) is now complete. These fourteen villas are of a
  new super-luxury design, and it is anticipated that their average rate
  will be considerably higher than any of the current inventory. One of
  these villas has been specially designed to provide a much-needed
  “Presidential Suite” for the resort.

  The Company is now in final negotiations to acquire the remaining 70%
  interest in Laguna Development Company Limited (the Company is already
  a 30% partner in this property) which will provide a further 1,146 Rai
  of contiguous land to Laguna Phuket.

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. Inventory at Sheraton is now sold out, and we plan to add
  additional duplex inventory together with a new Townhouse product
  commencing construction in 2002. We expect to continue our Property
  Sales office, adapting to the market as appropriate.

  On the Laguna Homes plots surrounding the golf course, we are
  currently developing two ‘spec.’ houses, for the newly introduced Golf
  Villas, which is a house and land package. We plan more development of
  this type as well as adding some cosmetic infrastructure to improve
  the desirability of this inventory.

  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. We have completed improvements to the central laundry and
  internal transportation, and added a Computer Training Centre as a
  central facility for our employees in 2001. 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 Plus” with selected agents in key feeder markets, will now be 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 are thriving in the positive
  occupancy climate of the resort. Canal Village remains fully booked,
  and we are examining the possibility of building separate offices for
  the Allamanada Vacation Club, which occupies eight shop spaces, to
  make room for the waiting list of potential tenants.

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

  The Banyan Tree Golf Club is an important amenity for Laguna Phuket.
  We have now completed a two-year programme to improve all the greens
  at the club.

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

  Other investment opportunities

  In early January 2002, the Company purchased the remaining 49% of the
  shares in Laguna Banyan Tree Limited from Banyan Tree Holding Pte Ltd.
  in order to increase the groups equity stake in the Banyan Tree Phuket
  Hotel. LRH management have purchased this investment as it is
  considered that this will enhance future shareholder value and will
  consider any other such investments if they become available to
  improve the profitability and net worth of the group.

  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 2001 this has resulted
  in LRH having a particularly low 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.