1998 Annual Report - Four Seasons Hotels and Resorts

ANNUAL INFORMATION FORM(continued)Strong Competitive PositionThe Corporation believes that its competitive position is strengthened by the significant barriers to entry into the luxurysegment of the hotel management business. Those impediments include the time and significant capital resourcesrequired to establish a well recognized luxury brand name and to obtain management contracts for luxury properties inkey locations in strategic markets worldwide. The Corporation also believes that it has developed a unique service culture,depth of management expertise and multiple capital resources over its 38-year history that would be difficult to replicate.Business and Growth StrategyThe business strategy of Four Seasons is to continue to enhance its industry position and overall profitability through afocused international expansion program that capitalizes on the strengths of its core hotel management operations and theglobal value of its brand name. In 1998, revenue generated by the hotels and resorts managed by Four Seasons exceeded$2.2 billion. The Corporation’s consolidated revenues from hotel management and hotel ownership from these propertiesin 1998 was $249 million. From 1993 through 1998, the Corporation increased its hotel management earnings at acompounded annual rate of growth of over 23% from $27.9 million in 1993 to $79.9 million in 1998, and the profitmargin from hotel management operations over this period increased from 46% to 63%.The Corporation believes that the strength of its brand name, its global marketing presence and its operationalexpertise result in REVPAR premiums and strong operating profitability for luxury hotels under its management,providing Four Seasons with a competitive advantage in obtaining new management contracts worldwide. REVPARfor Core Hotels 7 in North America and Europe, during 1997, the most recent year for which comparable data isavailable, was US$198 and US$342, respectively, 111% and 222% higher than the REVPAR of the North Americanand European luxury segments, respectively, as compiled byHorwath International. 8The Corporation’s growth strategy is to seek to utilizeNorth American REVPAR (US$)European REVPAR (US$)its competitive strengths to increase earnings, cash flow,hotel owners’ returns, and shareholder value by continuingto improve the performance of its existing hotel portfolio, bygenerating profitable growth through the acquisition of newmanagement contracts and by capitalizing on opportunities200375to leverage its luxury brand name through compatible business100175extensions such as vacation ownership.Growth from Existing PropertiesFour Seasons believes opportunities exist for growth withinits existing and newly opened properties by increasing marketshare and REVPAR, thereby improving the hotels’ profitabilityand in turn Four Seasons’ fee revenues and ownership earnings.From 1997 to 1998, REVPAR for Core Hotels in NorthAmerica and Europe increased approximately 8% and 7%,0Four Seasons Core Hotels for North America, Europe respectivelyHorwath statistics for North America, Europe respectively07 The term “Core Hotels” means hotels and resorts which have been managed by the Corporation throughout the year and the previous year. The Core Hotelconcept is used to give year over year comparisons.8 Horwath and Smith Travel Research.16Four Seasons Hotels Inc.