Fairmont Posts Fourth Quarter Net Income of $11 million; Aided by Balanced Customer Mix and Geographical Diversity / Jan 2003

Hotel Operating Statistics
2002 EBITDA Improved 22% to $198 Million
Secures Second Management Contract in United Arab Emirates
2003 EBITDA Guidance of $215 - $225 Million

TORONTO, Jan. 30 /CNW/ - Fairmont Hotels & Resorts Inc. ("FHR" or the "Company") (TSX/NYSE: FHR) today announced financial results for the fourth quarter and year ended December 31, 2002. All amounts are expressed in U.S. dollars. FHR expects to release its 2002 annual report in early March and will hold its annual general meeting at 10:00 a.m. on April 17, 2003 at The Fairmont Royal York in Toronto.

FHR's financial results for the year ended December 31, 2001 contain substantial non-recurring items related to the reorganization of Canadian Pacific Limited ("CPL"), including the operating results of CPL's four discontinued businesses, reorganization expenses and CPL corporate expenses. CPL's reorganization became effective October 1, 2001. Given the inclusion of these non-recurring charges, management does not consider the prior year's net income and earnings per share ("EPS") to be comparable with the current period. Management has prepared a proforma 2001 statement of net income including proforma EPS, which is available on FHR's investor website.

"We are pleased to report EBITDA(1) of $198.3 million in 2002, which is at the high end of our expectations. This represents a 21.6% improvement over 2001 levels, which we expect to be the largest EBITDA growth among major hoteliers this year," said William R. Fatt, Chief Executive Officer of FHR. On a comparable basis, revenue per available room ("RevPAR") for our owned hotels decreased 1.3%, while RevPAR at the Fairmont managed properties was down 2.0%. These results are anticipated to be ahead of overall industry performance."
-------------------------------------------------------------------------
            (In millions except                 Three months          Year ended
            EPS amounts)                      ended December 31       December 31
-------------------------------------------------------------------------
                                                2002     2001        2002      2001
-------------------------------------------------------------------------
            Operating Revenues(2)              $125.6    $97.7      $590.6    $537.3
-------------------------------------------------------------------------
            EBITDA                               32.8     14.4       198.3     163.1
-------------------------------------------------------------------------
            Income (loss) from
             continuing operations               11.0     49.6        92.5     (28.2)
-------------------------------------------------------------------------
            Basic EPS from
             continuing operations               0.14     0.63        1.18     (0.43)
-------------------------------------------------------------------------

Continued Mr. Fatt, "Our hotel portfolio continues to benefit from our balanced customer mix and geographical diversity. FHR's strength in the leisure segment has helped mitigate the effect of prolonged weakness in corporate demand. FHR's resorts represent about 70% of the company's earnings. Our Canadian properties account for approximately half of our annual EBITDA and Canadian economic performance has been very strong. In addition, extensive investments in renovations over the past few years are beginning to generate substantial returns."

"The acquisition of The Fairmont Orchid, Hawaii, and the addition of The Fairmont Washington, D.C. management contract in December 2002 expanded the Fairmont portfolio to 41 properties in six countries. We look forward to
strengthening the positioning and overall performance of these two properties," added Mr. Fatt.

Fourth Quarter Consolidated Results

Operating revenues increased to $125.6 million, up 28.6% from $97.7 million in 2001. Fourth quarter EBITDA more than doubled to $32.8 million from $14.4 million in 2001, meeting management's expectation of $24.5 - $34.5 million. EBITDA benefited from a $5.8 million gain on the sale of real estate in Bermuda, which was included in our guidance, while no gains on land sales were realized in the same period last year.

Income from continuing operations was $11.0 million compared to income from continuing operations of $49.6 million in 2001. In 2001, income from continuing operations included an income tax recovery of $51.4 million that related primarily to tax benefits realized on expenses incurred to complete the CPL reorganization and the impact of various favorable tax reassessments. For the quarter, EPS from continuing operations was $0.14, which met management's EPS expectation of $0.10 - $0.15.

Fourth Quarter Hotel Ownership Operations

Revenues from hotel ownership improved 22.0% to $109.1 million compared to 2001. FHR's strength in the leisure segment combined with its recently renovated properties has softened the impact of weaker corporate travel caused by a sluggish global economy and the potential for U.S. military action. The acquisition of The Fairmont Orchid, Hawaii closed in mid-December and therefore had a minimal impact on fourth quarter earnings.

RevPAR increased 12.6% compared to the fourth quarter of 2001, resulting from a 6.3 point increase in occupancy and stable average daily rate ("ADR"). The Canadian owned hotels showed the greatest RevPAR increase at 16.8%, driven by improvements in both occupancy and ADR. RevPAR increased by 9.8% at FHR's U.S. and International comparable portfolio, resulting from a 7.2 point rise in occupancy notwithstanding a 4.4% drop in ADR. In addition, the two Bermuda properties showed significant improvement with combined RevPAR increases of 42.3%. These hotels were not included in the comparable portfolio due to the impact of significant renovations in 2001.

Fourth Quarter Management Operations

Fairmont

Revenues under management of $323 million increased 19.2% over 2001 as a result of the addition in 2002 of long-term management contracts for The Fairmont Dubai, the Sheraton Suites Calgary Eau Claire, The Fairmont Sonoma Mission Inn & Spa and The Fairmont Washington, D.C. as well as RevPAR improvements at almost all other hotels. Management fee revenues increased to $11.0 million from $9.3 million in 2001, consistent with the increase in revenues under management. Incentive fee revenues were relatively unchanged from 2001.

RevPAR improved 9.3% during the fourth quarter, driven by an increase in occupancy of 3.5 points and a 3.0% rise in ADR to $158.17. The Canadian comparable hotels and the U.S. and International portfolio experienced RevPAR growth of 11.4% and 6.8%, respectively.

Delta

In the fourth quarter of 2002, revenues under management increased 4.3% to $72 million from $69 million in 2001 resulting in management fee revenues increasing to $2.8 million compared to $2.2 million in 2001. During the quarter, Delta posted an 8.9% RevPAR increase, resulting from a 2.3 point improvement in occupancy and a 4.5% rise in ADR. The Delta Sun Peaks Resort in Kamloops, British Columbia opened in December and the Delta St. Eugene Mission Resort in Cranbrook, British Columbia opened in January 2003.

Year-End Consolidated Results

Operating revenues increased 9.9% to $590.6 million for the year ended December 31, 2002. The improvement in revenues was attributable to 2002 portfolio additions as well as returns realized from capital investments made to properties in 2000 and 2001. EBITDA of $198.3 million was up 21.6% and was positively impacted by land sale gains of $11.5 million in 2002 and approximately $3.7 million in first quarter cost reductions.

Income from continuing operations was $92.5 million compared to a loss from continuing operations of $28.2 million in the prior period. EPS from continuing operations was $1.18 in 2002, which met management's guidance of $1.14-$1.19. This compared to a loss from continuing operations of $0.43 per share in 2001. These improvements are attributable to improved operating performance in 2002 and non-recurring charges related to the CPL reorganization in 2001.

Year-End Hotel Ownership Operations

Revenues from hotel ownership of $516.6 million improved 5.5% compared to 2001. Superior performance at the renovated hotels not included in the comparable set, particularly the two Bermuda properties, was the main contributor to this growth. RevPAR for the comparable owned hotels declined 1.3% from $114.14 in 2001 resulting mainly from a 2.3% drop in ADR. It is anticipated that the newly acquired properties and improving returns on the Company's renovated hotels will drive results.

Year-End Hotel Management Operations

Fairmont

RevPAR for the year was $105.37 in 2002, down 2.0% from 2001. The decline resulted from a 3.3% drop in ADR offset by a 0.9 point increase in occupancy. In the absence of currency fluctuations, RevPAR would have decreased by approximately 1.2% compared to the prior year.

Delta

Comparable hotels' RevPAR was down 1.2% from 2001 resulting from a 1.6 point decrease in occupancy offset slightly by a 1.4% improvement in ADR. In the absence of the currency fluctuations, RevPAR was comparable to last year.

Capital Expenditures

Hotel related capital expenditures for the quarter totaled $18.7 million. Projects underway during the quarter included guestroom and corridor renovations at The Fairmont Hamilton Princess and The Fairmont Banff Springs and the ongoing construction of the meeting facility at The Fairmont Chateau Lake Louise.

Over the past few years, FHR has invested significantly in its portfolio, including substantial capital investments in seven of its top nine properties. Attractive returns on the capital invested are expected to be achieved once the properties realize the full benefit of these improvements, which typically occurs two years after completion. FHR expects that 2003 capital expenditures will be in the range of $110-120 million.

Labor Relations

Labor negotiations are currently in progress at three Fairmont properties. In 2002, 15 Fairmont properties and six Delta hotels successfully settled new labor contracts. In 2003, labor contracts at eight Fairmont properties and five Delta hotels expire. Although it is not possible to predict the outcome of labor negotiations, management is hopeful that mutually beneficial contracts will be reached without labor disruption.

Corporate Activities

Today, FHR announced that it has agreed to acquire the remaining 50% equity interest in The Fairmont Copley Plaza Boston from entities controlled by Prince Alwaleed bin Talal bin Abdulaziz Al Saud of Saudi Arabia ("Prince Alwaleed"). The purchase price for the equity interest is approximately $23 million and will be satisfied by the issuance of one million common shares. In addition, FHR will acquire net working capital of about $9 million for cash. Existing secured debt of approximately $66.5 million on the property will remain in place. The transaction is expected to close in the first quarter of 2003, subject to regulatory approvals. Following this transaction, Prince Alwaleed will hold approximately 4.9% of FHR's issued and outstanding shares. FHR purchased the initial 50% equity interest in July 2001 and at that time committed to a substantial guestroom renovation and upgrade. The renovation program, which began in November 2002, is expected to be completed by early next year.

"We are pleased to have acquired the remaining real estate interest in such an important property in one of North America's key gateway cities," commented Mr. Fatt. "We are committed to the ongoing improvement of the image, quality and performance of this prominent property in the heart of Boston, and expect it to be a strong contributor to our company and our brand."

FHR also announced today that it has entered into an agreement with National Investment Corporation of Abu Dhabi to manage a second hotel in the United Arab Emirates. This 300-room resort will be built on a landscaped breakwater in the country's capital. Construction is underway with land reclamation ongoing and the resort is expected to open in early 2005.
Commenting on the announcement, Mr. Fatt said, "We are delighted to expand our portfolio to include another luxury hotel development abroad. The quality of the physical asset and amenities at The Fairmont Dubai are a perfect complement to the hotel's service levels and we look forward to replicating this at our new resort."

On December 17, 2002, FHR acquired The Orchid at Mauna Lani on the Island of Hawaii for a purchase price of approximately $140 million plus closing costs. Existing credit facilities funded the acquisition. The resort was officially flagged "The Fairmont Orchid, Hawaii" on January 15, 2003.

On December 4, 2002, FHR assumed management of the Monarch Hotel in Washington, D.C., which was concurrently acquired by Legacy Hotels Real Estate Investment Trust ("Legacy"). As part of the financing for the purchase of the Monarch Hotel, Legacy sold to a group of underwriters 19.5 million trust units for gross proceeds of approximately $95 million. FHR acquired 6.5 million of these units for about $32 million to maintain its approximate 35% ownership interest in Legacy. On December 11, 2002, the hotel was officially flagged "The Fairmont Washington, D.C."

During the quarter, FHR did not repurchase any shares under its normal course issuer bid. The Company has the capacity to repurchase up to 10% of its outstanding shares in the twelve-month period ending October 1, 2003.

Outlook

Commented Mr. Fatt, "The current economic environment continues to present challenges that we expect to persist throughout 2003. With few signs of an overall U.S. economic recovery, we are not anticipating an improvement in business travel in 2003. We are cautiously optimistic that the North American leisure segment and the Canadian economy will remain strong and that the ongoing impact resulting from our extensive renovation program will allow FHR to generate above average earnings growth again in 2003."

Based on these assumptions, FHR estimates that EBITDA in 2003 will be in the range of $215 - $225 million, including approximately $11 million from real estate activities. Net income is estimated to be between $80 and $90 million and basic EPS to be in the range of $1.00 - $1.10.

FHR anticipates first quarter 2003 EBITDA of $30 - $40 million and basic EPS is expected to be in the range of $0.01 - $0.05. Investors are cautioned that quarterly performance tends to be more difficult to predict.

"We expect the recent additions to our portfolio, combined with growing returns from the capital invested, to position us for good performance in 2003," said Mr. Fatt. "We plan to add two to four Fairmont hotels per year to our portfolio through a combination of new management contracts, minority equity investments and acquisitions. Combined with our significant financial flexibility and unique affiliation with Legacy, we are well positioned to take advantage of any potential growth opportunities that may arise this year."