1997 Annual Report - Four Seasons Hotels and Resorts

ANNUAL INFORMATION FORM(continued)Since purchasing its interest in FSHI, Kingdom and its affiliates have purchased a majority interest in the Four SeasonsHotel London, and have purchased the Hôtel George V in Paris, which Four Seasons will manage as a Four Seasons hotel in1999 when it reopens following an extensive renovation program. Kingdom has invested or will invest in a number ofadditional properties under various stages of development that the Corporation expects to manage under the Four Seasonsbrand name, such as the Four Seasons hotels in Aviara, Punta Mita, Scottsdale, Cairo, Amman and Riyadh.Strong Management TeamFour Seasons’ corporate executive management team consists of 11 individuals who are responsible for the global strategicdirection of the Corporation and who have an average of 17 years of experience with Four Seasons. This team is supportedby 21 corporate vice presidents, who are responsible for various aspects of the Corporation’s daily operations, as well asby 41 general managers, who together have an average of 13 years of experience with Four Seasons. It is a fundamentalstrategy of Four Seasons to develop its senior management team from within to ensure consistency of the service cultureand work ethic.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 resources requiredto establish a well recognized luxury brand name and to obtain management contracts for luxury properties in keylocations in strategic markets worldwide. The Corporation also believes that it has developed a unique service culture, depthof management expertise and multiple capital resources over its 37 year history that would bedifficult to replicate.$ 200$ 150$ 100$ 50$ 0Four Seasons REVPAR Premium (US$)9596Four Seasons Core HotelsWorldwide Luxury Segment 10Business and Growth StrategyThe business strategy of Four Seasons is to continue to enhance its industry position andoverall profitability through a focused international expansion program that capitalizes on thestrengths of its core hotel management operations and the global value of its brand name.In 1997, revenue generated by the hotels and resorts managed by Four Seasons exceeded$2.1 billion. The Corporation’s consolidated revenues from hotel management and hotelownership from these properties in 1997 was $240.0 million. From 1993 through 1997, theCorporation increased its fee revenues from hotel management operations from $60.3 millionto $106.0 million, a 15.2% compounded annual rate of growth. Over this period, theCorporation increased its hotel management earnings at a 22.9% compounded annual rate ofgrowth from $27.9 million in 1993 to $63.7 million in 1997, and the profit margin from hotelmanagement operations increased from 46% to 60%.The Corporation believes that the strength of its brand name, its global marketingpresence and its operational expertise result in REVPAR premiums and strong operatingprofitability for luxury hotels under its management, providing Four Seasons witha competitive advantage in obtaining new management contracts worldwide. REVPAR forCore Hotels 9 worldwide and in North America during 1996, the most recent year for which9 The term “Core Hotels” means hotels and resorts which have been managed by the Corporation throughout the year and the previous year. Core hotel is usedto give year over year comparisons.14Four Seasons Hotels Inc.