Appendix V Letter from the Market Consultant in Relation to Its Hong Kong Hotel Industry Report

APPENDIX V LETTER FROM THE MARKET CONSULTANT IN RELATION TO ITS HONG KONG HOTEL INDUSTRY REPORT RevPAR of RKH and High Tariff A Hotels, 1997 to 2005 High Tariff A Regal Kowloon Hotel Kowloon Shangri-La HK$ 1,600 1,400 1,200 1,000 800 600 400 200 0 1997 1998 1999 2000 2001 2002 2003 2004 2005 Source: HKTB, Regal Hotels International Ltd., Shangri-La Asia Limited, Savills Research & Consultancy The movement of the RevPAR of RKH has generally tracked the High Tariff A hotel average. RevPAR was affected by the Asian Financial Crises (1997-8) and SARS (2003) but reacted to favorable market conditions such as the I.T. boom (2000), the post SARS recovery and the implementation of IVS (2003). Despite the volatility, the average annual growth rate of the RevPAR of RKH between 1997 and 2005 was 1% per annum, lower than the High Tariff A hotel average of 4% per annum, largely reflecting the negative impact of its aging facilities. It is noteworthy that in 2005, since occupancy rates were at high levels, operators have been more aggressive in raising room rates and RKH was no exception. RevPAR in 2005 was therefore driven largely by room rate rises. The average room rate of RKH over 2006 recorded a strong increase of 16% compared with the same period in 2005. The average occupancy rate also increased to 86%, compared with 84% recorded over the same period last year, RevPAR over this period increased by approximately 18%. Outlook RKH is strategically located in a traditional tourist node and a core business district. The vicinity is served by a comprehensive transportation and road network. Infrastructure projects under construction or under planning, such as The Kowloon Southern Link and The West Kowloon Cultural District, are set to enhance the accessibility and increase the attractiveness of the area. The strong performance of the import/export trade sector and the growing M.I.C.E. market are expected to continue to support RKH’s business. In Tsim Sha Tsui, 1,314 hotel rooms will be completed over the next 4 years. However, RKH has ample hotel facilities including meeting, F&B and recreational facilities and has been newly renovated to maintain its competitiveness. — 513 — APPENDIX V LETTER FROM THE MARKET CONSULTANT IN RELATION TO ITS HONG KONG HOTEL INDUSTRY REPORT Although Hotel Panorama will be completed in early 2007 providing 324 rooms, Hyatt Regency Hong Kong (723 rooms) was closed at the end of 2005 (to be redeveloped into a retail center), resulting in a net decrease of around 400 hotel rooms in Tsim Sha Tsui. Given these factors (and bearing in mind that RKH has been recently renovated), we expect the occupancy rate of RKH to remain high in 2007 and track the market from 2008 to 2010. Average Occupancy Rate Projections, 2007E to 2010E High Tariff A Hotels RKH Events Related to RKH 2007-2010 86% — 87% per annum 89% per annum Completion of renovation works, net decrease of available hotel rooms in the district Source: Savills Research & Consultancy Higher-than-market growth of room rates is expected in 2007, as the total stock of hotel rooms in the district will only be replenished to levels prior to the closure of the Hyatt Regency while the number of tourists is expected to continue rising. The growth rate of RKH room rates is then expected to track the market from 2008 to 2010, with a 6% to 8% increment each year. Average Room Rate Projections, 2007E to 2010E High Tariff A Hotels RKH Events related to RKH 2007 +8% — 10% +9% — 16% Completion of renovation works, net decrease of available hotel rooms in the district 2008-2010 +6% — 8% per annum +6% — 8% per annum — Source: Savills Research & Consultancy RKH’s RevPAR is expected to rise along with the High Tariff A market in view of the generally positive outlook for the hotel industry and a rising trend in business travel. Meanwhile, stronger- than-average growth in RevPAR can be expected for RKH in 2007 as the completion of renovation works should restore its competitiveness and the tighter hotel room availability in Tsim Sha Tsui effectively reduces direct competition. The average annual growth rate of the RevPAR of RKH over 2006 to 2010 is expected to be in the region of 10% to 15% per annum, higher than the overall High Tariff A market of 11% per annum. — 514 — APPENDIX V LETTER FROM THE MARKET CONSULTANT IN RELATION TO ITS HONG KONG HOTEL INDUSTRY REPORT Regal Oriental Hotel The Kai Tak development, although currently under planning review, is anticipated to be one of Hong Kong’s most extensive redevelopment projects, and is expected to stimulate demand for both hotel rooms and F&B at Regal Oriental Hotel (“ROH”) once the scheme is underway. In the vicinity, the districts of Kowloon Bay and Kwun Tong are being transformed into a major decentralized office node. Currently, ROH is the only hotel in Kowloon East and aims to further enhance its competitive position with completion of new guest rooms offering a ‘hip hotel’ concept to business travelers and tourists. Location ROH is the only hotel in Kowloon City, opposite the former Kai Tak Airport. The Property ROH, a 15-story building (plus two basement levels) opened in 1982, has a total gross floor area of approximately 243,167 sq.ft. 62 The hotel comprises 390 guest rooms, 3 restaurants, 2 bars, 1 cake shop, 1 banquet hall of approximately 3,400 sq.ft. and 13 meeting rooms. It also provides 6 karaoke rooms including one main hall. ROH is classified as a High Tariff B Hotel by the HKTB. ROH is the only hotel offering a full range of meeting and F&B services in Kowloon East63. The majority of its guest rooms offer an open harbor view. The guest rooms are spacious and the availability of ‘triple’ (3 beds) and ‘quadruple’ (4 beds) rooms are attractive to family travelers. ROH lacks recreational facilities such as a swimming pool or health club. Asset Enhancement Works The enhancement works involve: 1) converting a portion of 3/F into 49 rooms; 2) converting a portion of 3/F into a lounge area; 3) refurnishing the existing guest rooms (refurnishing work to half of the guest rooms has been completed). 62 Including 14,200 sq.ft. of Po Sing Court. Source: Regal Hotels International Ltd. 63 A general description of a larger area comprising Kowloon City, San Po Kong, Kowloon Bay and Kwun Tong — 515 — APPENDIX V LETTER FROM THE MARKET CONSULTANT IN RELATION TO ITS HONG KONG HOTEL INDUSTRY REPORT The new guest rooms will be operated as a ‘hip hotel’ providing stylish, trendy and fashionable decoration and sophisticated services. The enhancement works are scheduled to be completed in Q3/2007. The work area is localized on 3/F, which accounts for only 5.9% of the total covered area of the hotel. The addition of guest rooms will involve no major structural alteration works, but only block wall erection, plastering, laying of tiles and carpet, as well as the installation of sanitary fitments. Noise carpentry work will be kept to a minimum by off-site prefabrication. Recent works have included the renovation of the hotel’s F&B outlets together with its main lobby and driveway. Transportation and Vicinity Although ROH is not served by rail links, Prince Edward Road East on the door step of ROH is the major trunk road serving Kowloon East and connects the area with major industrial / business districts including Kwun Tong, Kowloon Bay, Tsim Sha Tsui and Mongkok in Kowloon. Quarry Bay and Causeway Bay on Hong Kong Island are approximately a 20 to 25-minute drive from ROH via the Eastern Harbour Crossing and Cross-Harbour Tunnel respectively. The provision of shuttle bus services from ROH to the Airport provides extra convenience to its guests. The anticipated KCR Shatin to Central Link is expected to improve the accessibility of ROH. This link is expected to shorten travel times between the immediate locality of ROH and major business districts on Hong Kong Island as well as Mainland China. Although the KCRC targeted the completion of the Shatin to Central Link by 2011, the scheme and implementation program are subject to a final decision by the Government of HKSAR. The move of the Airport from Kai Tak to Chek Lap Kok in 1998 has weakened the business of Kowloon City, however, the area remains attractive to both locals and visitors for its wide variety of Chinese and Southeast Asian cuisine. Approximately a 10-minute drive from ROH, Kowloon Bay and Kwun Tong, 2 traditionally industrial areas of Hong Kong, are being transformed into a major decentralized office node. The total Grade ‘A’ office stock of these 2 areas combined is expected to increase from approximately 1.9 million sq.ft. in 1995 to 9.8 million sq.ft. by 2010, larger than the total Grade ‘A’ office stock of Tsim Sha Tsui today. These developments, during and after construction, will enhance commercial activity in Kowloon East and ROH. — 516 — APPENDIX V LETTER FROM THE MARKET CONSULTANT IN RELATION TO ITS HONG KONG HOTEL INDUSTRY REPORT The Kai Tak development plan, which involves approximately 328 hectares of land, is a long term project and is expected to have a mixed effect on ROH. The Government has recently launched a Stage 2 Public Participation Programme for the Kai Tak Planning Review. There are 3 different draft Outline Concept Plans: Proposed Land Use Area (hectares) Concept 1 Concept 2 Concept 3 Office — 3 (0.9%) — Mixed Use (Office, Hotel & Retail) 10 (3.1%) 20 (6.1%) 19 (5.8%) Mixed Use (Housing & Commercial) 9 (2.7%) 5 (1.5%) — High Density Housing 41 (12.5%) 33 (10.1%) 14 (4.2%) Medium Density Housing 17 (5.2%) 10 (3.1%) 18 (5.5%) Low Density Housing ——13

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