1997 Annual Report - Four Seasons Hotels and Resorts

December 31, 1996 to $115 million as at December 31, 1997, resulting in an improvement in the debt to equity ratio,net of cash, from 2.6:1 in 1996 to 0.5:1 in 1997.• The Corporation continued to manage its real estate ownership risk profile by disposing of its minority ownershipinvestment in the Four Seasons Hotel Washington and agreeing to dispose of its interests in The Ritz-Carlton Hotel Chicagoand the Four Seasons Hotel Chicago. These investment dispositions are expected to enhance the Corporation’s managementearnings by facilitating an increase in the number of rooms under management at the Four Seasons Hotel Washingtonand an increase in the management fees from The Ritz-Carlton Hotel Chicago.• The Corporation successfully launched its first vacation ownership venture, located at Aviara in Carlsbad, California.On-site sales of the vacation ownership units began in August 1997, and the owners began occupying the units inDecember 1997. Sales of the units matched the business plan for the year. A vacation ownership project which is underconstruction in Punta Mita, Mexico, is expected to begin pre-sales in the fourth quarter of 1998. Another vacationownership project is under development in Scottsdale, Arizona.• The Corporation successfully completed the formation of the strategic alliance with the Carlson Hospitality Groupof Minneapolis to franchise the Regent brand.• The Corporation deployed its 1997 year-end cash reserves by providing the acquisition financing for the Four SeasonsHotel London in the first quarter of 1998. The Corporation also significantly improved the management terms inconnection with this hotel.O P E R A T I O N A L A N D F I N A N C I A L R E V I E W A N D A N A L Y S I SFour Seasons has two operating segments: hotel management operations and hotel ownership operations. It is Four Seasons’objective to maximize its hotel management operations and generally to only make investments in hotel ownership, whererequired, to secure additional management opportunities or to improve the management fee economics from existing hotels.Revenues from hotel management operations and hotel ownership operations as a percentage of consolidated revenues areset forth in the following table. The table also includes earnings before other operating items, interest and taxes, (EBITDA)from hotel management operations and hotel ownership operations as a percentage of total EBITDA. The significant increasein the percentage of consolidated revenues and EBITDA from hotel ownership operations is due to the consolidation of theoperating results of The Pierre in New York and the Four Seasons Hotel Vancouver beginning in 1997.1997 1996 1995 1994 1993Consolidated revenues:Fee revenues from hotel management 44.1% 78.5% 65.2% 62.2% 59.6%Revenues from hotel ownership 56.4 14.6 31.3 33.5 37.6Distributions from hotel investments 2.5 7.6 4.5 5.3 3.8Fees from hotel ownership to hotel management (3.0) (0.7) (1.0) (1.0) (1.0)100.0% 100.0% 100.0% 100.0% 100.0%EBITDA: (1)Hotel management operations 80.9% 86.5% 77.6% 76.4% 79.6%Hotel ownership operations 19.1 13.5 22.4 23.6 20.4(1) Earnings before other operating items, interest and taxes.100.0% 100.0% 100.0% 100.0% 100.0%29Four Seasons Hotels Inc.