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 last 15 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, the new JW Marriott on Mai Khao Beach which
  opened at the end of 2001.

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 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 add 50 higher end Water Villa’s of which phase I of 20 villas will
  commence construction in 2004. Fourteen additional 2 bedroom pool
  villas have commenced construction which will be sold to the public.

  At the Sheraton Grande Laguna Phuket 48 additional rooms will be
  constructed in 2004 and 2005 to be available for opening in the high
  season at the end of 2005. Dusit Laguna Resort also have plans to add
  an additional 100 rooms and suites during 2005 and 2006 for opening
  for the end of 2006.

  In 2002, the Company acquired the assets of Laguna Development Company
  Limited (the Company is a 30% partner in this company) which has
  provided a further 1,146 Rai of contiguous land to Laguna Phuket. An
  integrated residential community to be called Laguna Village has been
  planned for this site.

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. Activity in this area has changed as a result of the
  economic and market conditions and we continue to see a significant
  interest in our products where we deliver a turnkey property to the
  consumer together with many of the advantages of a Laguna Phuket
  address.

  In particular the Laguna Residence and Laguna Townhome products have
  proved to be extremely popular to the extent that the first two
  projects were almost sold out by year end. In order for us to keep
  pace with the strong demand, a number of other project sites have been
  identified and are in the process of design and obtaining government
  approvals so that they can be developed. This a very strong area of
  growth potential for the group.

  Allamanda Vacation Club

  In response to the changes in the Property Sales market, we launched
  our own vacation club in 1998. 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
  provides an important dynamic 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 Resort & Spa Bintan. In Phuket
  construction has commenced on the AVC hotel. This will provide a
  separate property dedicated to the members of the Allamanda Vacation
  Club and phase I of 60 units is expected to be completed in the second
  half of 2005.

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, water supply, computer training facilities and staff
  transportation 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’ 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 have built 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 building a Wedding Chapel with the intent
  to penetrate the lucrative weddings market, particularly from Japan.
  This is scheduled to open in the fourth quarter of 2004.

  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 and
  the condition of the golf course continues to be enhanced.

  Banyan Tree Gallery captures valuable retail spending by our guests
  for the Company, and provides a consistent product in logo-wear
  throughout the resort. 5 additional outlets in a number of countries
  are planned to be opened in 2004.

  LRH Cashflow

  Strong cash generation by 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 make debt
  repayments. At 31 December 2003 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.