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In 2011, our businesses should benefit from the generally positive outlook of the economies in Hong Kong and China.

Up to now, arrivals of affluent Chinese travellers from the Mainland have shown no signs of slowing down. Corporate travel will also be supported by robust economic activities in the region. Our Hong Kong hotels should perform well under these circumstances. However as all three hotels are already operating at or near their peak occupancy levels, the driver for RevPAR growth in 2011 will have to come mainly from further increases in room rates.

After completion of its overhaul in 2010, The Langham London has successfully repositioned itself among the leading luxury hotels in Central London. In a stable economic environment, there should be room for further gains in its occupancy and room rates in the coming year. The outlook for our hotels in Australia and New Zealand should also be stable in view of the favourable economic situations over there. For our hotels in the United States, while we anticipate the demand for rooms may be constrained by the relatively slow pace of economic recovery, there should be some modest improvement in their performance in 2011. Capital constraints of the last several years will lead to lower completions of new hotels in the United States. This could provide the platform for more meaningful RevPAR growth for our U.S. hotel in the following years.

The trend of increasing occupancy and escalating rent rates in the Central office market will be favourable to Champion REIT in the coming year. Citibank Plaza, its biggest asset, is located in Central where no large Grade-A office developments are scheduled for completion. While the property carried a 18.5% vacancy at the beginning of 2011, more than half of the existing vacant area will see tenant occupation before mid 2011, based on contracts already signed. Together with the steady income contribution from Langham Place Office Tower and Langham Place Mall, revenue for the Champion REITs will likely show an improvement over 2010. However, distributions of Champion REIT will depend on a number of factors, including the level of interest expense upon refinancing of the debt on the Citibank Plaza property in May 2011.

Thus far, the growth in the local economy has been robust. However, the growth has been in part driven by the vast amount of liquidity in the system, and in part by the exceptional growth in Mainland tourist arrivals. Hong Kongs

Atrium of Langham Place Mall

economy is now inextricably tied to the state of the China economy. Under the threat of rising inflation, the Central Government will introduce more control measures, including the gradual raising of RMB interest rates. Any subsequent cool down in the China economy could negatively affect the prospects of Hong Kong. We are mindful of these risks and their potential impact on our businesses in the region.

With regard to new investments, development opportunities in Mainland China remain high on our agenda, especially mixed-use development projects that generally generate higher financial returns. Economic growth in Mainland China is amongst the fastest in the world, where increasing urbanization and rising incomes will support property price growth in the long term. That should offer a favourable risk return profile for the Group. While we will be capitalizing on volatility in the marketplace to capture opportunities for new investments on a highly selective basis, we will continue to manage our finances prudently to ensure a manageable level of debts and a high level of liquidity.

LO Ka Shui Chairman and Managing Director

Hong Kong, 23 February 2011

Annual Report 2010


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