Four Seasons Hotels Inc. reports first quarter 2004 results

Four Seasons Hotels Inc. reports first quarter 2004 results 


TORONTO, May 6  /PRNewswire-FirstCall/ -- Four Seasons Hotels Inc. (TSX Symbol
"FSH"; NYSE Symbol "FS") today reported its results for the first quarter ended
March 31, 2004.

Overview of the Quarter (results for the three months ended March 31, 2004, as
compared to the same period in 2003)

As described in greater detail in the accompanying Management's Discussion and
Analysis for the three months ended March 31, 2004:

  -   Net earnings were $11.5 million ($0.33 basic earnings per share and
      $0.31 diluted earnings per share), as compared to a net loss of
      $9.3 million ($0.27 basic and diluted loss per share) for the first
      quarter of 2003.

  -   Adjusted(1) net earnings were $7.7 million ($0.22 basic adjusted
      earnings per share and $0.21 diluted adjusted earnings per share), as
      compared to adjusted net earnings of $2.5 million ($0.07 basic
      adjusted and diluted adjusted earnings per share) for the first
      quarter of 2003.

  -   RevPAR(2) of worldwide Core Hotels(3) increased 14.1%, on a US dollar
      basis.

  -   Gross operating margins(4) at worldwide Core Hotels increased 330
      basis points to 28.0%.

  -   Profits under management increased 30.4%, on a US dollar basis.

  -   Management fee revenues (excluding reimbursed costs) increased 13.9%.

  -   Ownership losses declined $3.5 million or 26.3%.



Also during the quarter, Four Seasons opened Four Seasons Resort Costa Rica at
Peninsula Papagayo and Four Seasons Resort Provence at Terre Blanche.

"The recovery in travel demand accelerated throughout the first quarter and has
continued into April. If current trends continue, we anticipate that 2004 will
be a year of substantial rebound for the lodging industry and for Four
Seasons," said Douglas L. Ludwig, Chief Financial Officer and Executive Vice
President. "We are pleased to continue to report industry-leading RevPAR and
profitability at the properties under our management. Although the first
quarter is typically the quietest quarter for business travel, the momentum of
business travel demand has continued to improve. We believe that our continuing
focus on the guest experience, whether for a business or leisure related stay,
will translate into continued RevPAR and profitability growth."

"This is a very exciting time for Four Seasons as we anticipate benefiting from
the combination of an improving economic outlook and the scheduled opening of a
number of important new Four Seasons properties this year," commented Isadore
Sharp, Chairman and Chief Executive Officer. "In the past twelve months, we
have added six new projects to our portfolio, including our first mountain
resort in Jackson Hole and our first European resort in the south of France at
Terre Blanche. By the end of 2005, we expect to add another 14 projects,
including Four Seasons hotels in Budapest and Hong Kong, and resorts in
Whistler and Langkawi."

                          FIRST QUARTER OF 2004
                  MANAGEMENT'S DISCUSSION AND ANALYSIS



This Management's Discussion and Analysis ("MD&A") for the three months ended
March 31, 2004 is provided as of May 5, 2004. It should be read in conjunction
with the interim consolidated financial statements for that period and the MD&A
for the year ended December 31, 2003 and the audited consolidated financial
statements for that period. Except as disclosed in this MD&A, there has been no
material change in the information disclosed in the MD&A for the year ended
December 31, 2003. A summary of consolidated revenues, management earnings,
ownership and corporate operations earnings and net earnings for the past eight
quarters can be found in note 5.

  Operational and Financial Review and Analysis
  ---------------------------------------------

  Operating Environment

  Seasonality
  -----------


Four Seasons hotels and resorts are affected by normally recurring seasonal
patterns and, for most of the properties, demand is usually lower in the period
from December through March compared to the remainder of the year. Typically,
the first quarter is the weakest quarter and the fourth quarter is the
strongest quarter for the majority of the properties.

Our ownership operations are particularly affected by seasonal fluctuations,
with lower revenue, higher operating losses and lower cash flow in the first
quarter. As a result, ownership operations usually incur an operating loss in
the first quarter of each year.

Management operations are also impacted by seasonal patterns, as revenues are
affected by the seasonality of hotel and resort revenues and operating results.
Urban hotels generally experience lower revenues and operating results in the
first quarter. However, this negative impact on management revenues is offset,
to some degree, by increased travel to our resorts in the period.

  Hotel Operating Results
  -----------------------

  -------------------------------------------------------------------------
                                       First Quarter 2004 increase over
                                      (decrease from) First Quarter 2003
  -------------------------------------------------------------------------
                                               (percentage change,
                                               on US dollar basis)
  -------------------------------------------------------------------------
                                                      Gross         Gross
                                                    Operating     Operating
                                                     Revenue       Profit
  Region                                RevPAR        (GOR)         (GOP)
  -------------------------------------------------------------------------
  Worldwide Core Hotels                   14.1%         14.9%         30.4%
  -------------------------------------------------------------------------
  US Core Hotels                           8.6%          8.7%         13.8%
  -------------------------------------------------------------------------
  Other Americas/Caribbean Core Hotels    20.3%         20.5%         40.6%
  -------------------------------------------------------------------------
  Europe/Middle East Core Hotels          30.2%         35.6%         88.9%
  -------------------------------------------------------------------------
  Asia/Pacific Core Hotels                14.5%         15.9%         32.6%
  -------------------------------------------------------------------------

  Underlying these operating results:

  -   Revenue improvements and cost management efforts at the properties
      resulted in the significant increase in margins (although there was
      continued pressure on profit margins due to higher costs relating
      primarily to labour (including health care, benefits and worker's
      compensation), energy and insurance). The most significant
      improvements were realized in Europe/Middle East, in particular, the
      properties in the Middle East, where labour cost pressures were
      relatively lower.
  -   Business and leisure travel demand improved in the majority of the
      markets in which we operate, although January and February are
      traditionally not strong months for business travel demand.
  -   Group meetings and travel demand did not improve in the quarter, with
      the exception of the Las Vegas market. As a result, properties that
      typically derive the larger portion of their business from group
      travel (including Aviara and the Ritz Carlton Chicago) experienced
      RevPAR declines.
  -   Properties under management in Las Vegas, Los Angeles, Houston, San
      Francisco, Washington, New York and Palm Beach performed particularly
      well on a RevPAR basis, relative to the average for the region.
  -   In the Other Americas/Caribbean region, the properties under
      management in South America and the resorts in the region reflected
      improved demand. The hotels under management in Toronto and Vancouver
      experienced weak demand in the quarter, which is typical for the
      period.
  -   All of the properties in the Europe/Middle East had RevPAR
      improvements as a result of strong demand in the quarter.
  -   The two properties in Bali realized improvements in occupancy levels
      (although they remain below the levels realized prior to the
      terrorist attacks on the island in 2002), achieved rates in excess of
      US$320 and were profitable.

  Management Operations



Management fee revenues (excluding reimbursed costs(6)) increased 13.9%, or
$4.1 million, to $33.4 million in the first quarter of 2004, as compared to
$29.3 million in the first quarter of 2003. This increase was the result of the
improvement in revenues under management stemming from RevPAR and other revenue
increases at the Core Hotels under management and an increase in fees from
recently opened hotels.

Incentive fees increased approximately 25% in the first quarter of 2004, as
compared to the same period in 2003, with 31 of the hotels and resorts under
management accruing incentive fees as compared to 27 during the same period
last year. The increase in incentive fees was attributable to the improvement
in gross operating profits at the properties under management in each of the
geographic regions in which we operate.

General and administrative expenses (excluding reimbursed costs) increased
11.5% to $10.9 million in the first quarter of 2004, as compared to the same
period in 2003. The increase related primarily to cost of living increases for
corporate employees that were implemented during the first quarter of 2004, and
an increase in the number of employees at our corporate office (primarily in
the design and procurement department) to handle the significant growth in our
portfolio.

As a result of the items described above, our management earnings before other
operating items for the first quarter of 2004 increased 15.1% to $22.5 million,
as compared to $19.6 million in the first quarter of 2003. Our management
operations profit margin(7) (excluding reimbursed costs) increased to 67.5% in
the first quarter of 2004, as compared to 66.8% in the first quarter of 2003.

As a result of adopting the Canadian Institute of Chartered Accountants
("CICA") Section 1100, "Generally Accepted Accounting Principles", which was
issued in 2003 and was effective for 2004, in the first quarter of 2004, we
began recording all reimbursed costs in revenue on a gross, rather than net,
basis. These costs include marketing, reservations, and advertising charges, as
well as the out-of-pocket expense charges, which we charge to properties under
management on a cost recovery basis. For the first quarter of 2003, reimbursed
costs have also been reclassified on a consistent basis and included in
revenues.

Ownership and Corporate Operations(8)

Losses from ownership and corporate operations before other operating items
declined $3.5 million to $9.7 million in the first quarter of 2004, as compared
to a loss of $13.2 million in the first quarter of 2003.

RevPAR at The Pierre increased primarily as a result of a 15% improvement in
occupancy in the first quarter of 2004, as compared to the same period in 2003,
reflecting higher travel demand in New York. As a result, the loss at The
Pierre declined $1.9 million in the first quarter of 2004, as compared to the
first quarter of 2003.

Since reaching our maximum funding obligation of the stipulated minimum lease
payments at Four Seasons Hotel Berlin in August of 2003, the lease payments in
2004 have been limited to the cash flow generated by the hotel. This resulted
in a decline of $1.8 million in the operating loss from Four Seasons Hotel
Berlin in the first quarter of 2004. In 2004, we have continued to consolidate
the revenue and expenses of Four Seasons Hotel Berlin. However, the stipulated
minimum lease payments beyond amounts which can be funded by the hotel's
operation will not be accrued. As a result, we expect any earnings or losses
from Four Seasons Hotel Berlin to be immaterial throughout the year.

We continue to be in discussions with the landlords of The Pierre, Four Seasons
Hotel Berlin and Four Seasons Hotel Vancouver to determine what, if any,
alternatives may be available to modify or restructure our investments in these
hotels. There can be no assurance that acceptable alternative arrangements will
be agreed upon with respect to any or all of these hotels.

Stock Option Expense

Stock option expense for the first quarter of 2004 was $413,000, as compared to
$15,000 for the same period in 2003. Stock option expense is allocated between
Management Operations ($195,000) and Ownership and Corporate Operations
($218,000).

Other Income (Expense)

Other income for the first quarter of 2004 was $4.3 million, as compared to an
expense of $12.9 million for the same period in 2003.

Included in other income for the first quarter of 2004 was a $4.6 million
foreign exchange gain, which is a non-cash, unrealized foreign exchange gain,
compared to an $8.3 million foreign exchange loss for the same period in 2003.
These foreign exchange gains and losses arose from the translation to Canadian
dollars at current exchange rates at the end of each month of our non-Canadian
dollar-denominated net monetary assets that are not included in our designated
self-sustaining subsidiaries, and foreign exchange gains and losses on net
monetary assets incurred by our designated foreign self-sustaining
subsidiaries. Net monetary assets are the sum of our foreign currency-
denominated monetary assets and liabilities, which consist primarily of cash
and cash equivalents, accounts receivable, long-term receivables and long-term
obligations, as determined under Canadian generally accepted accounting
principles (GAAP).

From an economic perspective, we look to offset our net monetary asset position
against the full obligation of our outstanding convertible notes described
below under "Liquidity and Capital Resources". Under Canadian GAAP, the
convertible notes are allocated between long-term obligations and shareholders'
equity. The portion allocated to long-term obligations and included in net
monetary assets was US$46.7 million, and US$125.8 million was allocated to
shareholders' equity at the time of issuance. If the portion of the convertible
notes included in shareholders' equity was revalued at the current exchange
rates, which is not contemplated under Canadian GAAP, the result of this
revaluation would have been a non-cash, unrealized foreign exchange loss of
$2.3 million for the first quarter of 2004. We believe we currently have an
appropriate economic hedge of our net monetary assets and liabilities. For a
further discussion of the convertible notes, see "Liquidity and Capital
Resources".

Also included in other expense during the first quarter of 2003 were legal and
other enforcement costs of $4.6 million in connection with the dispute with the
owners of Four Seasons hotels in Caracas and Seattle. The Seattle dispute was
settled and although still outstanding, any future expenses associated with the
Caracas dispute are not expected to be significant. These disputes are more
fully described in the MD&A and the audited consolidated financial statements
for the year ended December 31, 2003.

Net Interest Income

During the first quarter of 2004, we had net interest income of $1.1 million,
as compared to $683,000 in the first quarter of 2003. Net interest income is a
combination of approximately $4.1 million in interest income and approximately
$3.0 million in interest expense in the first quarter of 2004, as compared to
$3.6 million and $2.9 million, respectively, for the same period in 2003. The
increase in interest income is primarily attributable to higher interest income
from loans to managed properties.

Income Tax Expense

Our effective tax rate in the first quarter of 2004 was 22%, as compared to an
effective tax rate of 3% in the first quarter of 2003. The variation from our
expected 24% tax rate is the result of certain items not being tax effected,
including a portion of the unrealized foreign exchange gains and losses, since
they will never be realized for tax purposes. In addition, stock option expense
is not deductible for Canadian tax purposes and, as such, is not tax effected.

Net Earnings and Earnings per Share

Net earnings for the quarter ended March 31, 2004 were $11.5 million ($0.33
basic earnings per share and $0.31 diluted earnings per share), as compared to
a net loss of $9.3 million ($0.27 basic and diluted loss per share) for the
quarter ended March 31, 2003.

  Liquidity and Capital Resources
  -------------------------------


Our cash and cash equivalents were $174.3 million as at March 31, 2004, as
compared to $170.7 million as at December 31, 2003.

Long-term obligations (as determined under Canadian GAAP) increased from $120.1
million as at December 31, 2003 to $124.2 million as at March 31, 2004,
primarily due to accreted interest on our convertible notes and foreign
exchange translation. As discussed above, in Other Income (Expense), under
Canadian GAAP, a portion of our convertible notes is included in equity.

In 2003, we increased availability under our committed bank credit facilities
by US$12.5 million and we now have US$212.5 million of committed bank credit
facilities, all of which expire in July 2004. We are currently in the process
of negotiating the extension of these credit facilities. As at March 31, 2004,
no amounts were borrowed under these credit facilities. However, approximately
US$28 million of letters of credit were issued under those facilities. No
amounts have been drawn under these letters of credit.

We believe that, absent unusual opportunities, these bank credit facilities,
when combined with cash on hand and internally generated cash flow, should be
more than adequate to allow us to finance our normal operating needs and
anticipated investment commitments related to our current growth objectives.

During 1999, we issued US$655.5 million principal amount at maturity (September
23, 2029) of convertible notes for gross proceeds of US$172.5 million. The net
proceeds of the issuance, after deducting offering expenses and underwriters'
commission, were US$166 million. We are entitled to redeem the convertible
notes commencing in September 2004 for cash equal to the issue price plus
accrued interest calculated at 4 1/2% per annum. Holders of the notes have
conversion rights, which they can exercise at any time before the maturity date
or date of redemption of the notes, pursuant to which they can require us to
issue to them 5.284 Limited Voting Shares for each US$1,000 principal amount of
notes. The holders of notes also can require us to repurchase the notes in
September 2004 for an amount equal to the issue price plus accrued interest
calculated at 4 1/2% per annum. This right is also available in September 2009
and September 2014. We have a choice of settling our obligation, in connection
with the conversion or purchase of the notes at the option of the holder, with
cash or Limited Voting Shares.

As described above, we may redeem all or a portion of the notes at any time on
or after September 23, 2004 for cash at the issue price plus accrued interest
(calculated at 4 1/2% per annum) to the date of purchase. It is possible that
we may redeem some or all of the notes, especially in the current interest rate
environment. A cash redemption in September 2004 of all outstanding notes would
require a cash payment to the note holders of approximately US$215.5 million,
assuming that the holders did not exercise their right to convert their notes
before the redemption date. If we redeem the notes, we may replace the
financing provided by the notes with a combination of debt (which could be
raised by various means, including bank lines and/or the issuance of additional
notes or convertible notes) and/or the utilization of cash and cash
equivalents. We filed a shelf registration statement and prospectus during the
first quarter that would accommodate a public offering of various debt
instruments (including convertible debt) in a principal amount of up to US$250
million.

Contractual Obligations and Other Commitments

As discussed in the MD&A for the year ended December 31, 2003, we have
contractual obligations and other commitments, including certain pension and
lease commitments. There has been no material change to these commitments
through the first quarter of 2004 and, other than as discussed above relating
to the potential put/call relating to our convertible notes and funding
relating to our management opportunities described under "Financing
Activities/Investing Activities" below, we do not anticipate any material
change in respect of these commitments over the remainder of the current year.

Cash From Operations

During the first quarter of 2004, we generated $4.9 million from operations, as
compared to $21.8 million for the same period in 2003. The decrease in cash
from operations of $16.9 million in 2004 resulted primarily from an increase in
working capital of $24.3 million, partially offset by a decrease in cash used
in ownership and corporate operations of $3.7 million and an increase in cash
contributed by management operations of $3.1 million.

Financing Activities/Investing Activities

Part of our business strategy is to invest a portion of available cash to
obtain management agreements or enhance existing management arrangements. These
investments in, or advances in respect of or to owners of, properties are made
where we believe that the overall economic return to Four Seasons justifies the
investment or advance.

During the quarter, we funded $6.8 million in management opportunities,
including amounts advanced as loans receivable and investments in hotel
partnerships such as Whistler. This level of investment was consistent with our
business plan, with the investments being made to secure new long-term
management agreements or to enhance existing management arrangements. During
the remaining three quarters of 2004, we expect to fund US$45 million to US$55
million in respect of investments in, or advances to, various projects,
including properties in Palo Alto and Washington.

  Outstanding Share Data

  -------------------------------------------------------------------------
                                                         Outstanding as
  Designation                                            at May 3, 2004
  -------------------------------------------------------------------------
  Variable Multiple Voting Shares(a)                          3,832,172
  -------------------------------------------------------------------------
  Limited Voting Shares                                      31,612,218
  -------------------------------------------------------------------------
  Options to acquire Limited Voting Shares:
  -------------------------------------------------------------------------
    Outstanding                                               5,627,139
  -------------------------------------------------------------------------
    Exercisable                                               2,808,603
  -------------------------------------------------------------------------
  Convertible Notes(b)                                 US$211.7 million(c)
  -------------------------------------------------------------------------
  -------------------------------------------------------------------------
  (a) Convertible into Limited Voting Shares at any time at the option of
      the holder on a one-for-one basis.
  (b) Subject to adjustment in certain circumstances, each US$1,000
      principal amount of notes is convertible, at the option of the
      holder, into 5.284 Limited Voting Shares (3,463,155 Limited Voting
      Shares in aggregate). We have the right to acquire notes that are
      tendered for conversion for cash equal to the then fair market value
      of the underlying Limited Voting Shares.
  (c) This amount is equal to the issue price of the convertible notes plus
      accrued interest calculated at 4.5% per annum.

  Looking Ahead
  -------------


The MD&A for the year ended December 31, 2003 provided certain forward- looking
information regarding our expectations for 2004. Travel continues to be booked
close to the actual travel dates. This pattern, although having modestly
improved during the first quarter of 2004, continues to make it difficult to
predict future travel patterns with certainty.

Based on the travel trends that we experienced in the first quarter of 2004 and
that we currently are observing, we would expect the second quarter of this
year to reflect improvements over both the second quarter of 2003 (which was
significantly affected by the war in Iraq and SARS) and the first quarter of
2004. We currently are expecting that these demand improvements should result
in RevPAR for worldwide Core Hotels in the second quarter increasing by more
than 15%, as compared to the same period last year. We expect that the majority
of this improvement will result from the occupancy rebounding in the
Asia/Pacific region from 30% in second quarter of 2003, to in excess of 60% and
in Europe/Middle East region from 50%, in second quarter of 2003, to in excess
of 65%. Additionally, we expect that pricing improvements will be realized in
all geographic regions in the second quarter of 2004. We expect that these
improvements should allow us to realize gross operating margin improvements of
more than 200 basis points in the second quarter of 2004, as compared to the
second quarter of 2003.

  Changes in Accounting Policies
  ------------------------------


In December 2001, the CICA issued an accounting guideline relating to hedging
relationships. The guideline establishes requirements for the identification,
documentation, designation and effectiveness of hedging relationships and was
effective for fiscal years beginning on or after July 1, 2003. Effective
January 1, 2004, we ceased designating our US dollar forward contracts as
hedges of our US dollar revenues. These contracts were entered into during
2002, and all of these contracts will mature during 2004. The foreign exchange
gains on these contracts of $14.6 million, which were deferred prior to January
1, 2004, will be recognized throughout 2004 as an increase of fee revenues.
Effective January 1, 2004, our US dollar forward contracts are being
marked-to-market on a monthly basis with the resulting changes in fair values
being recorded as a foreign exchange gain or loss. The impact of ceasing to
designate our US dollar forward contracts as hedges of our US dollar revenues
was to decrease net earnings by $171,000 for the three months ended March 31,
2004 and to increase receivables by $10.7 million and accounts payable and
accrued liabilities by $11 million as at March 31, 2004.

Effective January 1, 2004, we also adopted the following accounting standards,
Accounting for Asset Retirement Obligations, Impairment of Long- Lived Assets,
Revenue Recognition and Revenue Arrangements with Multiple Deliverables, all of
which are more fully described in the MD&A for the year ended December 31,
2003. The application of these accounting treatments did not have an impact on
our interim financial statements. See also note 1 to the interim consolidated
financial statements.

  Critical Accounting Estimates
  -----------------------------


Under Canadian GAAP, we are required to make estimates when we account for and
report assets, liabilities, revenues and expenses, and contingencies. We are
also required to evaluate the estimates that we use.

We base our estimates on past experience and other factors that we believe are
reasonable under the circumstances. Because this process of estimation involves
varying degrees of judgment and uncertainty, the amounts currently reported in
the financial statements could, in the future, prove to be inaccurate.

We believe the following critical accounting estimates are the more significant
judgments and estimates used in the preparation of our consolidated financial
statements.

Recoverability of Investments

Estimates are required to be used by management to assess the recoverability of
our investments in long-term receivables, hotel partnerships and corporations,
management contracts, and trademarks and trade names.

Long-term receivables are reviewed for impairment when significant events or
circumstances including, but not limited to, the following occur: changes in
general economic trends, defaults in interest or principal payments,
deterioration in a borrower's financial condition or creditworthiness
(including severe losses in the current year or recent years), or a significant
decline in the value of the security underlying a loan. We measure the
impairment of long-term receivables based on the present value of expected
future cash flows (discounted at the original effective interest rate) or the
estimated fair value of the collateral. If an impairment exists, we establish a
specific allowance for doubtful long-term receivables for the difference
between the recorded investment and the present value of the expected future
cash flows or the estimated fair value of the collateral. We apply this
impairment policy individually to all long-term receivables and do not
aggregate long-term receivables for the purpose of applying this policy.

For investments in hotel partnerships and corporations, we determine if there
is an impairment in value by reviewing periodic independent valuations and the
undiscounted cash flows of the related property. In the event of a decline in
value of the investment that is other than temporary, the investment is written
down to its estimated recoverable amount.

Investments in management contracts and investments in trademarks and trade
names are evaluated on at least an annual basis to determine whether the net
book value will be recovered from future operations. We base these evaluations
upon the projected future net fee stream related to the respective property on
an undiscounted basis. If the undiscounted cash flows are insufficient to
recover the remaining net book value, then the undiscounted cash flows are used
as the revised carrying value, and a write-down for the difference is recorded.

Estimates of recoverable amounts and future cash flows are based on estimates
of the profitability of the related managed properties, which, in turn, depend
upon assumptions regarding future conditions in the general or local
hospitality industry, including competition from other hotels, changes in
travel patterns, and other factors that affect the properties' gross operating
revenue and profits. Estimates of recoverable amounts and future cash flows may
also depend upon, among other things, periodic independent valuations,
assumptions regarding local real estate market conditions, property and income
taxes, interest rates and the availability, cost and terms of financing, the
impact of present or future legislation or regulation, debt incurred by the
properties that rank ahead of us, owners' termination rights under the terms of
the management agreements, disputes with owners, and other factors affecting
the profitability and saleability of the properties and our investments.

These assumptions, estimates and evaluations are subject to the availability of
reliable comparable data, ongoing geopolitical concerns and the uncertainty of
predictions concerning future events. Accordingly, estimates of recoverable
amounts and future cash flows are subjective and may not ultimately be
achieved. Should the underlying circumstances change, the estimated recoverable
amounts and future cash flows could change by a material amount.

Income Taxes

We account for income taxes using the liability method and calculate our income
tax provision based on the expected tax treatment of transactions recorded in
our consolidated financial statements. Under this method, future tax assets and
liabilities are recognized based on differences between the bases of assets and
liabilities used for financial statement and income tax purposes, using
substantively enacted tax rates. In determining the current and future
components of the tax provision, management interprets tax legislation in a
variety of jurisdictions and makes assumptions about the expected timing of the
reversal of future tax assets and liabilities. If our interpretations differ
from those of the tax authorities, enacted tax rates change or the timing of
reversals is not as anticipated, the tax provision could materially increase or
decrease in future periods.

In measuring the amount of future income tax assets and liabilities we are
periodically required to develop estimates of the tax basis of assets and
liabilities. In circumstances where the applicable tax laws and regulations are
either unclear or subject to ongoing varying interpretations, changes in these
estimates could occur that could materially affect the amounts of future income
tax assets and liabilities recorded in our consolidated financial statements.
For the year ended December 31, 2003, the most significant tax bases estimate
that would be affected by differences in interpretation of tax laws was the
accumulated net operating losses carried forward of $30.6 million.

For every material future tax asset, we evaluate the likelihood of whether some
portion or all of the asset will not be realized. This evaluation is based on,
among other things, expected levels of future taxable income and the pattern
and timing of reversals of temporary timing differences that give rise to
future tax assets and liabilities. If, based on the weight of available
evidence, we determine that it is more likely than not (a likelihood of more
than 50%) that all or some portion of a future tax asset will not be realized,
we record a valuation allowance against that asset. For the year ended December
31, 2003, the future income tax asset was $13.2 million, net of a valuation
allowance of $3.0 million.

Additional Information

Additional information about us (including our most recent annual information
form and our MD&A for the year ended December 31, 2003) is available on SEDAR
at http://www.sedar.com/.

  --------------------------------
  1.  Adjusted net earnings is equal to net earnings (loss) plus (i)
      foreign exchange loss, less (ii) foreign exchange gain, plus (iii)
      asset impairment charge, each tax-effected as applicable. Adjusted
      net earnings, as we calculate it, may not be comparable to adjusted
      net earnings used by other companies, which may be calculated
      differently. In addition, adjusted net earnings is not intended to
      represent net earnings as defined by Canadian GAAP and should not be
      considered an alternative to net earnings or any other measure of
      performance prescribed by Canadian GAAP. It is included because we
      believe it can assist in the period-over-period comparability of our
      financial performance.

      A reconciliation of net earnings (the nearest GAAP measure to
      adjusted net earnings) to adjusted net earnings is as follows:

                                                     Three months ended
      (Unaudited)                                         March 31,
      (In thousands of dollars)                      2004          2003
      ---------------------------------------------------------------------
      Net earnings (loss)                         $   11,474   $    (9,288)
      Adjustments:
        Foreign exchange loss (gain)                  (4,630)        8,267
        Net asset impairment charge(x)                   309         4,641
      Tax effect of adjustments                          591        (1,114)
                                                 --------------------------
      Adjusted net earnings                       $    7,744   $     2,506
                                                 --------------------------
                                                 --------------------------
      Adjusted basic earnings per share           $     0.22   $      0.07
                                                 --------------------------
                                                 --------------------------
      Adjusted diluted earnings per share         $     0.21   $      0.07
                                                 --------------------------
                                                 --------------------------
      (x) Includes legal and enforcement costs.


  2.  RevPAR is defined as average room revenue per available room. RevPAR
      is a commonly used indicator of market performance for hotels and
      resorts and represents the combination of the average daily room rate
      and the average occupancy rate achieved during the period. RevPAR
      does not include food and beverage or other ancillary revenues
      generated by a hotel or resort. RevPAR is the most commonly used
      measure in the lodging industry to measure the period-over-period
      performance of comparable properties.


  3.  The term "Core Hotels" means hotels and resorts under management for
      the full year of both 2004 and 2003. However, if a "Core Hotel" has
      undergone or is undergoing an extensive renovation program in one of
      those years that materially affects the operation of the property in
      that year, it ceases to be included as a "Core Hotel" in either year.
      Changes from the 2003/2002 Core Hotels are the additions of Four
      Seasons Hotel Amman, Four Seasons Resort Sharm el Sheikh, Four
      Seasons Hotel Shanghai and Four Seasons Hotel Tokyo at Marunouchi and
      the deletion of Four Seasons Biltmore Resort (Santa Barbara), which
      is undergoing an extensive renovation program in 2004.


  4.  Gross operating margin represents gross operating profit as a
      percentage of gross operating revenue.


  5.  Eight Quarter Summary:

  -------------------------------------------------------------------------
  (In millions of
   dollars except per
   share amounts)    1st Quarter   4th Quarter   3rd Quarter   2nd Quarter
  -------------------------------------------------------------------------
                     2004 2003(a)2003(a)  2002 2003(a)  2002 2003(a)  2002
  -------------------------------------------------------------------------
  Consolidated
   revenues(b)      $73.7  $68.9  $86.0  $88.4  $70.3  $71.6  $78.2  $89.8
  -------------------------------------------------------------------------
  Earnings (loss)
   before other
   operating items:
  -------------------------------------------------------------------------
    Management
     operations      22.5   19.6   20.7   21.6   18.8   15.5   20.5   24.0
  -------------------------------------------------------------------------
    Ownership and
     corporate
     operations      (9.7) (13.2)  (2.0)  (4.6)  (9.4)  (6.6)  (5.5)  (0.2)
  -------------------------------------------------------------------------
  Net earnings
   (loss):
    Total           $11.5  $(9.3) $11.7  $ 7.6  $ 4.4 $(12.3) $(1.4) $18.1
  -------------------------------------------------------------------------
    Basic earnings
     (loss) per
     share(c)       $0.33 $(0.27) $0.33  $0.22  $0.13 $(0.35)$(0.04) $0.52
  -------------------------------------------------------------------------
    Diluted earnings
     (loss) per
     share(c)       $0.31 $(0.27) $0.32  $0.22  $0.12 $(0.35)$(0.04) $0.48
  -------------------------------------------------------------------------
  -------------------------------------------------------------------------
  (a) In December 2003, the CICA amended Section 3870 of its Handbook to
      require entities to account for employee stock options using the fair
      value-based method, beginning January 1, 2004. In accordance with one
      of the transitional alternatives permitted under amended Section
      3870, in the fourth quarter of 2003 we prospectively adopted the fair
      value-based method with respect to all employee stock options granted
      on or after January 1, 2003. Accordingly, options granted prior to
      that date continue to be accounted for using the settlement method,
      and results for each of the quarters in 2002 have not been restated.
      In accordance with the new standard, however, the reported results
      for the first three quarters of 2003 are required to be restated. The
      prospective application of adopting the fair value-based method
      effective January 1, 2003 resulted in the following restatements: 1st
      Quarter 2003 - no effect on net loss or basic and diluted loss per
      share; 2nd Quarter 2003 - increase in net loss of $0.1 million and no
      effect on basic and diluted loss per share; 3rd Quarter and 4th
      Quarter 2003 - in each quarter, a decrease in net earnings of
      $0.4 million and a decrease in basic and diluted earnings per share
      of $0.01 for each quarter.
  (b) As a result of adopting Section 1100, "Generally Accepted Accounting
      Principles", which was issued by the CICA in July 2003, and was
      effective January 1, 2004, we have included the reimbursement of all
      out-of-pocket expenses in both revenues and expenses instead of
      recording certain reimbursed costs as a "net" amount. As a result of
      this change, consolidated revenues have been restated as follows:
      1st Quarter 2003 - increase of $7.9 million; 2nd Quarter 2003 -
      increase of $8.4 million; 3rd Quarter 2003 - increase of $8.0
      million; 4th Quarter 2003 - increase of $10.8 million; 2nd Quarter
      2002 - increase of $8.8 million; 3rd Quarter 2002 - increase of $9.4
      million; 4th Quarter 2002 - increase of $11.5 million.
  (c) Quarterly computations of per share amounts are made independently on
      a quarter-by-quarter basis and may not be identical to annual
      computations of per share amounts.


  6.  The following table illustrates the impact of adopting the new
      accounting standard (CICA Section 1100 - "Generally Accepted
      Accounting Principles", as it relates to the reimbursement of
      out-of-pocket costs) on a pro forma basis in the quarters for 2003
      as if the new standard was applicable during that time.

      ---------------------------------------------------------------------
                                                   2003
                                -------------------------------------------
                                   First     Second      Third     Fourth
      (In thousands of dollars)   Quarter    Quarter    Quarter    Quarter
      ---------------------------------------------------------------------
      Revenues:
      ---------------------------------------------------------------------
        Fee revenues             $ 29,305   $ 29,351   $ 28,822   $ 33,052
      ---------------------------------------------------------------------
        Cost reimbursements
         previously included
         in fee revenues(x)         6,925      7,381      7,395      7,525
      ---------------------------------------------------------------------
        Additional cost
         reimbursements             7,867      8,381      7,990     10,804
      ---------------------------------------------------------------------
        Total revenues             44,097     45,113     44,207     51,381
      ---------------------------------------------------------------------
      Operating costs and
       expenses:
      ---------------------------------------------------------------------
        General and
         administrative expenses    9,736      8,901      9,980     12,391
      ---------------------------------------------------------------------
        Reimbursed costs           14,792     15,762     15,385     18,329
      ---------------------------------------------------------------------
        Total expenses             24,528     24,663     25,365     30,720
      ---------------------------------------------------------------------
      Total earnings from
       Management operations
       before other operating
       items                     $ 19,569   $ 20,450   $ 18,842   $ 20,661
      ---------------------------------------------------------------------
      ---------------------------------------------------------------------
      (x) Sales and marketing fees were included in both fee revenues and
          general and administrative expenses in 2003 and earlier years.


  7.  The management operations profit margin represents management
      operations earnings before other operating items, as a percent of
      management operations revenue.


  8.  Included in ownership and corporate operations are the consolidated
      revenues and expenses from our 100% leasehold interests in The Pierre
      in New York, Four Seasons Hotel Vancouver and Four Seasons Hotel
      Berlin, distributions from other ownership interests in properties
      that Four Seasons manages and corporate overhead expenses related, in
      part, to these ownership interests.

                             ---------------

  All dollar amounts referred to in this press release are Canadian dollars
  unless otherwise noted. The financial statements are prepared in
  accordance with Canadian generally accepted accounting principles.

                             ---------------

  This press release contains "forward-looking statements" within the
  meaning of federal securities laws, including RevPAR, profit margin and
  earnings trends; statements concerning the number of lodging properties
  expected to be added in this and future years; expected investment
  spending; and similar statements concerning anticipated future events
  results, circumstances, performance or expectations that are not
  historical facts. These statements are not guarantees of future
  performance and are subject to numerous risks and uncertainties,
  including the rate and extent of the current economic recovery and the
  rate and extent of the lodging industry's recovery from the terrorist
  attacks of September 11, 2001 and subsequent terrorist attacks, Severe
  Acute Respiratory Syndrome (SARS), the civil unrest in Iraq and
  elsewhere, supply and demand changes for hotel rooms and residential
  properties, competitive conditions in the lodging industry, relationships
  with clients and property owners, and the availability of capital to
  finance growth. Many of these risks and uncertainties can affect our
  actual results and could cause our actual results to differ materially
  from those expressed or implied in any forward-looking statement made by
  us or on our behalf. These statements are made as of the date of this
  press release and, except as required by applicable law, we undertake no
  obligation to publicly update or revise any forward-looking statement,
  whether as a result of new information, future events or otherwise.

                             ---------------

  We will hold a conference call today at 10:00 a.m. (Eastern Daylight
  Time) to discuss the first quarter financial results. The details are:

  To access the call dial:  1 [phone]   (U.S.A. and Canada)
                            1 [phone]   (outside U.S.A. and Canada)

  To access a replay of the call, which will be available for one week
  after the call, dial: 1 [phone], Reservation Number 21192385.

  A live web cast will also be available by visiting
  http://www.fourseasons.com/investor. This web cast will be archived for
  one month following the call.

                             ---------------

  On Wednesday, May 12, 2004, Four Seasons will be holding its Annual and
  Special Meeting of Shareholders in the Regency Ballroom of Four Seasons
  Hotel Toronto, 21 Avenue Road, Toronto, at 10:00 a.m. (Eastern Daylight
  Time). The meeting will be broadcast by live web cast at:
  http://www.fourseasons.com/investor. The web cast will be archived for an
  indefinite period of time.

                             ---------------



With a history spanning four decades and a portfolio that extends worldwide,
Four Seasons Hotels and Resorts is the world's leading operator of luxury
hotels, currently managing 62 properties in 29 countries. Four Seasons Resort
Provence at Terre Blanche opened March 25, 2004, the company's first resort in
Europe. Four Seasons continues to grow, with more than 20 projects under
construction or development in choice locations around the world. Four Seasons
consistently ranks high in global awards and accolades. In addition to having
the most Mobil Five Star awards in the industry, Four Seasons was included in
Fortune magazine's "100 Best Companies To Work For" for the seventh year in a
row. The company is also consistently highly ranked in readers' surveys in
publications such as Conde Nast Traveler, Travel + Leisure, Institutional
Investor, Andrew Harper's Hideaway Report, Gallivanter's Guide and the Zagat
Survey. Information on the company and its 43 years of achievement in the
hospitality industry can be accessed through the Four Seasons Web site at
http://www.fourseasons.com/.

  FOUR SEASONS HOTELS INC.

  CONSOLIDATED STATEMENTS OF OPERATIONS


  (Unaudited)
  (In thousands of dollars                            Three months ended
   except per share amounts)                               March 31,
                                                      2004            2003
  -------------------------------------------------------------------------
                                                               (restated -
                                                                 note 1(a))

  Consolidated revenues (note 5)               $    73,679      $   68,881
                                               ----------------------------
                                               ----------------------------

  MANAGEMENT OPERATIONS

  Revenues:
    Fee revenues                               $    33,377      $   29,305
    Reimbursed costs (note 1(c))                    14,486          14,792
                                               ----------------------------

                                                    47,863          44,097
                                               ----------------------------

  Expenses:
    General and administrative expenses            (10,856)         (9,736)
    Reimbursed costs (note 1(c))                   (14,486)        (14,792)
                                               ----------------------------

                                                   (25,342)        (24,528)
                                               ----------------------------

                                                    22,521          19,569
                                               ----------------------------

  OWNERSHIP AND CORPORATE OPERATIONS

  Revenues                                          26,795          25,778
  Expenses:
    Cost of sales and expenses                     (35,390)        (37,802)
    Fees to Management Operations                   (1,129)         (1,174)
                                               ----------------------------

                                                    (9,724)        (13,198)
                                               ----------------------------

  Earnings before other operating items             12,797           6,371
  Depreciation and amortization                     (3,625)         (3,710)
  Other income (expense), net (note 6)               4,321         (12,908)
                                               ----------------------------

  Earnings (loss) from operations                   13,493         (10,247)
  Interest income, net                               1,148             683
                                               ----------------------------

  Earnings (loss) before income taxes               14,641          (9,564)
                                               ----------------------------

  Income tax recovery (expense):
    Current                                         (2,788)          2,374
    Future                                            (379)         (2,098)
                                               ----------------------------

                                                    (3,167)            276
                                               ----------------------------

  Net earnings (loss)                          $    11,474      $   (9,288)
                                               ----------------------------
                                               ----------------------------

  Basic earnings (loss) per share
   (note 4)                                    $      0.33      $    (0.27)
                                               ----------------------------
                                               ----------------------------

  Diluted earnings (loss) per share
   (note 4)                                    $      0.31      $    (0.27)
                                               ----------------------------
                                               ----------------------------

  See accompanying notes to consolidated financial statements.



  FOUR SEASONS HOTELS INC.

  CONSOLIDATED BALANCE SHEETS
                                                     As at           As at
                                                  March 31,    December 31,
  (In thousands of dollars)                           2004            2003
  -------------------------------------------------------------------------
                                                 (Unaudited)

  ASSETS

  Current assets:
    Cash and cash equivalents                  $   174,269      $  170,725
    Receivables (note 1(b))                        109,278          88,636
    Inventory                                        2,072           2,169
    Prepaid expenses                                 6,236           3,780
                                               ----------------------------

                                                   291,855         265,310

  Long-term receivables                            201,632         197,635
  Investments in hotel partnerships and
   corporations                                    159,104         157,638
  Fixed assets                                      78,778          75,789
  Investment in management contracts               204,078         203,670
  Investment in trademarks and trade
   names                                             5,716           5,757
  Future income tax assets                          12,851          13,230
  Other assets                                      27,508          27,631
                                               ----------------------------

                                               $   981,522      $  946,660
                                               ----------------------------
                                               ----------------------------

  LIABILITIES AND SHAREHOLDERS' EQUITY

  Current liabilities:
    Accounts payable and accrued
     liabilities (note 1(b))                   $    73,703      $   61,045
    Long-term obligations due within
     one year                                        2,612           2,587
                                               ----------------------------

                                                    76,315          63,632

  Long-term obligations (notes 2 and 3)            121,592         117,521
  Shareholders' equity (note 4):
    Capital stock                                  333,306         329,274
    Convertible notes (note 3)                     178,543         178,543
    Contributed surplus                              5,942           5,529
    Retained earnings                              277,228         265,754
    Equity adjustment from foreign
     currency translation                          (11,404)        (13,593)
                                               ----------------------------

                                                   783,615         765,507
                                               ----------------------------

                                               $   981,522      $  946,660
                                               ----------------------------
                                               ----------------------------

  See accompanying notes to consolidated financial statements.



  FOUR SEASONS HOTELS INC.

  CONSOLIDATED STATEMENTS OF CASH PROVIDED BY OPERATIONS

                                                       Three months ended
  (Unaudited)                                               March 31,
  (In thousands of dollars)                           2004            2003
  -------------------------------------------------------------------------

  Cash provided by (used in) operations:

  MANAGEMENT OPERATIONS

  Earnings before other operating items        $    22,521      $   19,569
  Items not requiring an outlay of
   funds                                               514             409
                                               ----------------------------

  Working capital provided by
      Management Operations                         23,035          19,978
                                               ----------------------------

  OWNERSHIP AND CORPORATE OPERATIONS

  Loss before other operating items                 (9,724)        (13,198)
  Items not requiring an outlay of funds               218               9
                                               ----------------------------

  Working capital used in
   Ownership and Corporate Operations               (9,506)        (13,189)
                                               ----------------------------

                                                    13,529           6,789

  Interest received, net                             3,732           3,896
  Change in non-cash working capital               (11,547)         12,743
  Other                                               (805)         (1,610)
                                               ----------------------------

  Cash provided by operations                  $     4,909      $   21,818
                                               ----------------------------
                                               ----------------------------

  See accompanying notes to consolidated financial statements.



  FOUR SEASONS HOTELS INC.

  CONSOLIDATED STATEMENTS OF CASH FLOWS

                                                       Three months ended
  (Unaudited)                                               March 31,
  (In thousands of dollars)                           2004            2003
  -------------------------------------------------------------------------

  Cash provided by (used in):

  Operations:                                  $     4,909      $   21,818
                                               ----------------------------

  Financing:
    Long-term obligations including current
     portion                                           116              42
    Issuance of shares                               4,032             131
    Dividends paid                                  (1,833)         (1,809)
                                               ----------------------------

  Cash provided by (used in) financing               2,315          (1,636)
                                               ----------------------------

  Capital investments:
    Long-term receivables                              876          (5,806)
    Hotel investments                               (1,278)         (8,368)
    Purchase of fixed assets                        (4,359)         (3,881)
    Investments in trademarks, trade
     names and management contracts                   (367)           (216)
    Other assets                                    (1,109)         (2,601)
                                               ----------------------------

  Cash used in capital investments                  (6,237)        (20,872)
                                               ----------------------------

  Increase (decrease) in cash and cash
   equivalents                                         987            (690)
  Increase (decrease) in cash due to
   unrealized foreign exchange gain (loss)           2,557         (10,146)
  Cash and cash equivalents, beginning of
   period                                          170,725         165,036
                                               ----------------------------

  Cash and cash equivalents, end of period     $   174,269      $  154,200
                                               ----------------------------
                                               ----------------------------

  See accompanying notes to consolidated financial statements.



  FOUR SEASONS HOTELS INC.

  CONSOLIDATED STATEMENTS OF RETAINED EARNINGS

                                                       Three months ended
  (Unaudited)                                                March 31,
  (In thousands of dollars)                           2004            2003
  -------------------------------------------------------------------------

  Retained earnings, beginning of period       $   265,754      $  264,016
  Net earnings (loss)                               11,474          (9,288)
                                               ----------------------------

  Retained earnings, end of period             $   277,228      $  254,728
                                               ----------------------------
                                               ----------------------------

  See accompanying notes to consolidated financial statements.



  FOUR SEASONS HOTELS INC.

  NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

  (Unaudited)
  (In thousands of dollars except share amounts)
  -------------------------------------------------------------------------
  In these interim consolidated financial statements, the words "we", "us",
  "our", and other similar words are references to Four Seasons Hotels Inc.
  and its consolidated subsidiaries. These interim consolidated financial
  statements do not include all disclosures required by Canadian generally
  accepted accounting principles for annual financial statements and should
  be read in conjunction with our annual consolidated financial statements
  for the year ended December 31, 2003.

  1.  Significant accounting policies:

  The significant accounting policies used in preparing these interim
  consolidated financial statements are consistent with those used in
  preparing our annual consolidated financial statements for the year
  ended December 31, 2003, except as disclosed below:

  (a) Stock-based compensation and other stock-based payments:

  In December 2003, the Canadian Institute of Chartered Accountants
  ("CICA") amended Section 3870 to require entities to account for
  employee stock options using the fair value-based method, beginning
  January 1, 2004. In accordance with one of the transitional
  alternatives permitted under amended Section 3870, we prospectively
  adopted in December 2003 the fair value-based method with respect to
  all employee stock options granted on or after January 1, 2003.
  Accordingly, options granted prior to that date continue to be
  accounted for using the settlement method. The prospective
  application of adopting the fair value-based method effective
  January 1, 2003 has been applied retroactively in our consolidated
  financial statements, and amounts for the three months ended
  March 31, 2003 have been restated. The impact of this change for the
  three months ended March 31, 2004 was to decrease net earnings by
  $413 (2003 - $15) and to decrease basic and diluted earnings per
  share by $0.01 (2003 - nil).

  The fair value of stock options granted in the three months ended
  March 31, 2004 has been estimated using a Black-Scholes option
  pricing model with the following assumptions: risk-free interest
  rates ranging from 2.96% to 3.81% (2003 - 4.80% to 5.02%);
  semi-annual dividend per Limited Voting Share of $0.055
  (2003 - $0.055); volatility factor of the expected market price of
  our Limited Voting Shares of 30% (2003 - 32%); and expected lives of
  the options in 2004 and 2003 ranging between four and seven years,
  depending on the level of the employee who was granted stock options.
  For the options granted in the three months ended March 31, 2004, the
  weighted average fair value of the options at the grant dates was
  $27.00 (2003 - $15.96). For purposes of stock option expense and pro
  forma disclosures, the estimated fair value of the options is
  amortized to compensation expense over the options' vesting period.

  Section 3870 requires pro forma disclosure of the effect of the
  application of the fair value-based method to employee stock options
  granted on or after January 1, 2002 and not accounted for using the
  fair value-based method. For the three months ended March 31, 2004
  and 2003, if we had applied the fair value-based method to options
  granted from January 1, 2002 to December 31, 2002, our net earnings
  (loss) and basic and diluted earnings (loss) per share would have
  been adjusted to the pro forma amounts indicated below:


   (Unaudited)                                          Three months ended
  (In thousands of dollars                                   March 31,
  except per share amounts)                           2004            2003
  -------------------------------------------------------------------------
  Stock option expense included in
   compensation expense                        $      (413)     $      (15)
  -------------------------------------------------------------------------
  Net earnings (loss), as reported             $    11,474      $   (9,288)
  Additional expense that would have been
   recorded if all outstanding stock options
   granted during 2002 had been expensed              (859)           (862)
  -------------------------------------------------------------------------
  Pro forma net earnings (loss)                $    10,615      $  (10,150)
  -------------------------------------------------------------------------
  Earnings (loss) per share:
    Basic, as reported                         $      0.33      $    (0.27)
    Basic, pro forma                                  0.30           (0.29)
    Diluted, as reported                              0.31           (0.27)
    Diluted, pro forma                                0.29           (0.29)
  -------------------------------------------------------------------------


  (b) Hedging relationships:

  In December 2001, the CICA issued an accounting guideline relating to
  hedging relationships. The guideline establishes requirements for the
  identification, documentation, designation and effectiveness of hedging
  relationships and was effective for fiscal years beginning on or after
  July 1, 2003. Effective January 1, 2004, we ceased designating our US
  dollar forward contracts as hedges of our US dollar revenues. These
  contracts were entered into during 2002, and all of these contracts will
  mature during 2004. The foreign exchange gains on these contracts of
  $14,552, which were deferred prior to January 1, 2004, will be recognized
  in 2004 as an increase of fee revenues over the course of the year.

  Effective January 1, 2004, our US dollar forward contracts are being
  marked-to-market on a monthly basis with the resulting changes in fair
  values being recorded as a foreign exchange gain or loss. The impact of
  ceasing to designate our US dollar forward contracts as hedges of our US
  dollar revenues was to decrease net earnings by $171 for the three months
  ended March 31, 2004 and to increase receivables by $10,731 and accounts
  payable and accrued liabilities by $10,967 as at March 31, 2004.

  (c)  Reimbursed costs:

  As a result of adopting Section 1100, "Generally Accepted Accounting
  Principles", which was issued by the CICA in July 2003, and was effective
  January 1, 2004, we have included the reimbursement of all out-of-pocket
  expenses in both revenues and expenses instead of recording certain
  reimbursed costs as a "net" amount. The change in the accounting
  treatment of reimbursed costs resulted in an increase of both revenues
  and expenses for the three months ended March 31, 2004 of $7,174 (2003 -
  $7,867), but did not have an impact on net earnings. In addition, for the
  three months ended March 31, 2003, fee revenues and general and
  administrative expenses included certain other reimbursed costs of
  $6,925. These have been reclassified to reimbursed costs in both revenues
  and expenses to conform with the financial statement presentation adopted
  in 2004.

  (d) Impairment of long-lived assets:

  In December 2002, the CICA issued Section 3063, "Impairment of Long-Lived
  Assets". This new section establishes standards for the recognition,
  measurement and disclosure of the impairment of long-lived assets, and
  replaces the write-down provisions of Section 3061, "Property, Plant and
  Equipment". In accordance with Section 3063, long-lived assets, such as
  property, plant and equipment and purchased intangibles subject to
  amortization, are reviewed for impairment whenever events or changes in
  circumstances indicate that the carrying amount of an asset may not be
  recoverable. Recoverability of assets to be held and used is measured by
  a comparison of the carrying amount of an asset to estimated undiscounted
  future cash flows expected to be generated by the asset. If the carrying
  amount of an asset exceeds its estimated future cash flows, an impairment
  charge is recognized equal to the amount by which the carrying amount of
  the asset exceeds the fair value of the asset. The implementation of
  Section 3063, effective January 1, 2004, did not have an impact on our
  consolidated financial statements for the three months ended
  March 31, 2004.

  (e) Accounting for asset retirement obligations:

  In March 2003, the CICA issued Section 3110, "Accounting for Asset
  Retirement Obligations". Section 3110 requires companies to record the
  fair value of an asset retirement obligation as a liability in the year
  in which they incur a legal obligation associated with the retirement of
  tangible long-lived assets that result from the acquisition,
  construction, development and/or normal use of the assets. Companies are
  also required to record a corresponding asset that is depreciated over
  the life of the asset. Subsequent to the initial measurement of the asset
  retirement obligation, the obligation will be adjusted at the end of each
  period to reflect the passage of time and changes in the estimated future
  cash flows underlying the obligation. The implementation of Section 3110,
  effective January 1, 2004, did not have an impact on our consolidated
  financial statements for the three months ended March 31, 2004.

  (f)  Revenue recognition:

  In December 2003, the Emerging Issues Committee ("EIC") of the CICA
  issued Abstract EIC-141, "Revenue Recognition", which provides revenue
  recognition guidance. The implementation of EIC-141, effective January 1,
  2004, did not have an impact on our consolidated financial statements for
  the three months ended March 31, 2004.

  (g)  Revenue arrangements with multiple deliverables:

  In December 2003, the EIC issued Abstract EIC-142, "Revenue Arrangements
  with Multiple Deliverables", which addresses accounting for arrangements,
  entered into after December 31, 2003, where an enterprise will perform
  multiple revenue generating activities. The implementation of EIC-142 did
  not have an impact on our consolidated financial statements for the three
  months ended March 31, 2004.


  2.  Bank credit facilities:

  We have committed bank credit facilities of US$212,500, which expire in
  July 2004. No amounts have been borrowed under these facilities to date;
  however, approximately US$28,000 in letters of credit were issued under
  these facilities as at March 31, 2004. No amounts have been drawn under
  these letters of credit.

  3.  Convertible notes:

  During 1999, we issued US$655,519 principal amount at maturity
  (September 23, 2029) of convertible notes for gross proceeds of
  US$172,500. The net proceeds of the issuance, after deducting offering
  expenses and underwriters' commission, were US$166,000. As at March 31,
  2004, our consolidated balance sheet includes $91,265 (US$69,641) of
  convertible notes in long-term obligations and $178,543 of convertible
  notes in shareholders' equity. We are entitled to redeem the convertible
  notes commencing in September 2004 for cash equal to the issue price plus
  accrued interest calculated at 4 1/2% per annum. Holders of the notes
  have conversion rights, which they can exercise at any time before the
  maturity date or date of redemption of the notes, pursuant to which they
  can require us to issue to them 5.284 Limited Voting Shares for each one
  thousand US dollar principal amount of notes. The holders of notes also
  can require us to repurchase the notes in September 2004 for an amount
  equal to the issue price plus accrued interest calculated at 4 1/2% per
  annum. This right is also available in September 2009 and September 2014.
  We have a choice of settling our obligation, in connection with the
  conversion or purchase of the notes at the option of the holder, with
  cash or Limited Voting Shares.

  As described above, we may redeem all or a portion of the notes at any
  time on or after September 23, 2004 for cash at the issue price plus
  accrued interest (calculated at 4 1/2% per annum) to the date of
  purchase. It is possible that we may redeem some or all of the notes,
  especially if current interest rates continue. A cash redemption in
  September 2004 of all outstanding notes would require a cash payment to
  the note holders of approximately US$215,500, assuming that the holders
  did not exercise their right to convert their notes before the redemption
  date. If we redeem the notes, we may replace the financing provided by
  the notes with a combination of debt (which could be raised by various
  means, including bank lines and/or the issuance of additional notes or
  convertible notes) and/or the utilization of cash and cash equivalents.
  We filed a shelf registration statement and prospectus during the first
  quarter that would accommodate a public offering of various debt
  instruments (including convertible debt) in a principal amount of up to
  US$250,000.

  4.  Shareholders' equity:

  As at March 31, 2004, we have outstanding Variable Multiple Voting Shares
  ("VMVS") of 3,832,172, outstanding Limited Voting Shares ("LVS") of
  31,611,338 and outstanding stock options of 5,635,379 (weighted average
  exercise price of $54.93).

  A reconciliation of the net earnings (loss) and weighted average number
  of VMVS and LVS used to calculate basic earnings (loss) per share and
  diluted earnings (loss) per share is as follows:


                                           Three months ended
  (Unaudited)                                   March 31,
  (In thousands of dollars)          2004                    2003
  -------------------------------------------------------------------------
                           Net earnings  Shares       Net loss   Shares
  -------------------------------------------------------------------------

  Basic earnings (loss)
   per share:
    Net earnings (loss)
   and number of shares     $   11,474  35,289,622  $   (9,288) 34,882,670
  Effect of assumed
   dilutive conversions:
    Stock option plan                -   1,435,122           -           -
  -------------------------------------------------------------------------

  Diluted earnings (loss)
   per share:
    Net earnings (loss)
   and number of shares     $   11,474  36,724,744  $   (9,288) 34,882,670
  -------------------------------------------------------------------------
  -------------------------------------------------------------------------


  The diluted earnings (loss) per share calculation excluded the effect of
  the assumed conversions of 1,407,796 stock options to LVS, under our
  stock option plan, during the three months ended March 31, 2004 (2003 -
  5,864,037 stock options), as the inclusion of these conversions resulted
  in an anti- dilutive effect. In addition, the dilution relating to the
  conversion of our convertible notes to 3,463,155 LVS, by application of
  the "if-converted method", has been excluded from the calculation as the
  inclusion of this conversion resulted in an anti-dilutive effect for the
  three months ended March 31, 2004 and 2003.


  5.  Consolidated revenues:

  Consolidated revenues for Four Seasons Hotels Inc. comprise revenues from
  Management Operations, revenues from Ownership and Corporate Operations
  and distributions from hotel investments, less fees from Ownership and
  Corporate Operations to Management Operations.


  6.  Other income (expense), net:

  Included in other income (expense), net for the three months ended
  March 31, 2004 is a net foreign exchange gain of $4,630 (2003 - net
  foreign exchange loss of $8,267) related to the foreign currency
  translation gains and losses on unhedged net monetary asset and liability
  positions, primarily in US dollars, euros, pounds sterling and Australian
  dollars, and foreign exchange gains and losses incurred by our foreign
  self-sustaining subsidiaries.

  Also included in other income (expense), net for the three months ended
  March 31, 2004 are legal and enforcement costs of $217 (2003 - $4,611) in
  connection with the disputes with the owners of the Four Seasons hotels
  in Caracas and Seattle.


  7.  Seasonality:

  Our hotels and resorts are affected by normally recurring seasonal
  patterns and, for most of the properties, demand is usually lower in the
  period from December through March compared to the remainder of the year.
  Typically, the first quarter is the weakest quarter and the fourth
  quarter is the strongest quarter for the majority of the properties.

  Our ownership operations are particularly affected by seasonal
  fluctuations, with lower revenue, higher operating losses and lower cash
  flow in the first quarter. As a result, ownership operations typically
  incur an operating loss in the first quarter of each year.

  Management operations are also impacted by seasonal patterns, as
  revenues are affected by the seasonality of hotel and resort revenues and
  operating results. Urban hotels generally experience lower revenues and
  operating results in the first quarter. However, this negative impact on
  management revenues is offset, to some degree, by increased travel to our
  resorts in the period.



  FOUR SEASONS HOTELS INC.
  SUMMARY OF HOTEL OPERATING DATA - CORE HOTELS(1)


                                          Three months ended
                                               March 31,
  (Unaudited)                               2004        2003     Variance
  -------------------------------------------------------------------------
  Worldwide
    No. of Properties                           51          51           -
    No. of Rooms                            13,460      13,460           -
    Occupancy(2)                             64.9%       60.4%        4.5%
    ADR(3) - in US dollars              $      314  $      295        6.3%
    RevPAR(4) - in US dollars           $      203  $      178       14.1%
    Gross operating margin(5)                28.0%       24.7%        3.3%
  United States
    No. of Properties                           21          21           -
    No. of Rooms                             6,587       6,587           -
    Occupancy(2)                             68.0%       65.0%        3.0%
    ADR(3) - in US dollars              $      346  $      333        3.9%
    RevPAR(4) - in US dollars           $      235  $      216        8.6%
    Gross operating margin(5)                24.1%       23.0%        1.1%
  Other Americas/Caribbean
    No. of Properties                            7           7           -
    No. of Rooms                             1,534       1,534           -
    Occupancy(2)                             59.7%       53.8%        5.9%
    ADR(3) - in US dollars              $      344  $      318        8.4%
    RevPAR(4) - in US dollars           $      206  $      171       20.3%
    Gross operating margin(5)                36.2%       31.0%        5.2%
  Europe/Middle East
    No. of Properties                           11          11           -
    No. of Rooms                             2,133       2,133           -
    Occupancy(2)                             61.1%       47.2%       13.9%
    ADR(3) - in US dollars              $      373  $      371        0.6%
    RevPAR(4) - in US dollars           $      228  $      175       30.2%
    Gross operating margin(5)                30.9%       22.2%        8.7%
  Asia/Pacific
    No. of Properties                           12          12           -
    No. of Rooms                             3,206       3,206           -
    Occupancy(2)                             63.7%       62.9%        0.8%
    ADR(3) - in US dollars              $      190  $      168       13.2%
    RevPAR(4) - in US dollars           $      121  $      106       14.5%
    Gross operating margin(5)                32.9%       28.8%        4.1%


  1.  The term "Core Hotels" means hotels and resorts under management for
      the full year of both 2004 and 2003. However, if a "Core Hotel" has
      undergone or is undergoing an extensive renovation program in one of
      those years that materially affects the operation of the property in
      that year, it ceases to be included as a "Core Hotel" in either year.
      Changes from the 2003/2002 Core Hotels are the additions of Four
      Seasons Hotel Amman, Four Seasons Resort Sharm el Sheikh, Four
      Seasons Hotel Shanghai and Four Seasons Hotel Tokyo at Marunouchi and
      the deletion of Four Seasons Biltmore Resort (Santa Barbara), which
      is undergoing an extensive renovation program in 2004.
  2.  Occupancy percentage is defined as the total number of rooms occupied
      divided by the total number of rooms available.
  3.  ADR is defined as average daily room rate per room occupied.
  4.  RevPAR is defined as average room revenue per available room. RevPAR
      is a commonly used indicator of market performance for hotels and
      resorts and represents the combination of the average daily room rate
      and the average occupancy rate achieved during the period. RevPAR
      does not include food and beverage or other ancillary revenues
      generated by a hotel or resort. We report RevPAR as it is the most
      commonly used measure in the lodging industry to measure the period-
      over-period performance of comparable properties.
  5.  Gross operating margin represents gross operating profit as a percent
      of gross operating revenue.


  FOUR SEASONS HOTELS INC.

  SUMMARY OF HOTEL OPERATING DATA - ALL MANAGED HOTELS


                                                As at
                                               March 31,
  (Unaudited)                               2004        2003     Variance
  -------------------------------------------------------------------------

  Worldwide
    No. of Properties                           62          58           4
    No. of Rooms                            15,994      15,648         346

  United States
    No. of Properties                           24          23           1
    No. of Rooms                             7,145       7,250        (105)

  Other Americas/Caribbean
    No. of Properties                           10           8           2
    No. of Rooms                             2,082       1,746         336

  Europe/Middle East
    No. of Properties                           14          13           1
    No. of Rooms                             2,658       2,543         115

  Asia/Pacific
    No. of Properties                           14          14           -
    No. of Rooms                             4,109       4,109           -




  FOUR SEASONS HOTELS INC.

  REVENUES UNDER MANAGEMENT - ALL MANAGED HOTELS


                                                       Three months ended
  (Unaudited)                                               March 31,
  (In thousands of dollars)                             2004        2003
  -------------------------------------------------------------------------

  Revenues under management(1)                      $  698,711  $  659,248
                                                    -----------------------


  1.  Revenues under management consist of rooms, food and beverage,
      telephone and other revenues of all the hotels and resorts which we
      manage. Approximately 67% of the fee revenues (excluding reimbursed
      costs) we earned were calculated as a percentage of the total
      revenues under management of all hotels and resorts.



  FOUR SEASONS HOTELS INC.

  SCHEDULED OPENING OF PROPERTIES UNDER CONSTRUCTION OR
  IN ADVANCED STAGES OF DEVELOPMENT

  Hotel/Resort/Residence Club and Location(1)(2)              Approximate
                                                            Number of Rooms

  Scheduled 2004/2005 Openings
  ----------------------------
  Four Seasons Hotel Beijing, China                                    325
  Four Seasons Hotel Gresham Palace Budapest, Hungary                  175
  Four Seasons Hotel Cairo at Nile Plaza, Egypt(x)                     375
  Four Seasons Hotel Damascus, Syria                                   300
  Four Seasons Hotel Doha, Qatar                                       235
  Four Seasons Hotel Geneva, Switzerland                               100
  Four Seasons Hotel Hampshire, England                                135
  Four Seasons Hotel Hong Kong, Hong Kong(x)                           390
  Four Seasons Resort Lanai at Koele, HI, USA                          100
  Four Seasons Resort Lanai at Manele Bay, HI, USA                     250
  Four Seasons Resort Langkawi, Malaysia                                90
  Four Seasons Hotel Palo Alto, CA, USA                                200
  Four Seasons Resort Whistler, B.C., Canada                           240
  Four Seasons Private Residences Whistler, B.C., Canada                35

  Beyond 2005
  -----------
  Four Seasons Hotel Alexandria, Egypt(x)                              120
  Four Seasons Hotel Baltimore, MD, USA(x)                             200
  Four Seasons Hotel Beirut, Lebanon                                   230
  Four Seasons Resort Bora Bora, French Polynesia                      100
  Four Seasons Hotel Florence, Italy                                   115
  Four Seasons Hotel Istanbul at the Bosphorus, Turkey                 170
  Four Seasons Hotel Kuwait City, Kuwait                               225
  Four Seasons Hotel Mumbai, India                                     200
  Four Seasons Resort Puerto Rico, Puerto Rico(x)                      250
  Four Seasons Residence Club Punta Mita, Mexico                        35

  (x) Expected to include a residential component.

  1.  Information concerning hotels, resorts and Residence Clubs under
      construction or under development is based upon agreements and
      letters of intent and may be subject to change prior to the
      completion of the project. The dates of scheduled openings have been
      estimated by management based upon information provided by the
      various developers. There can be no assurance that the date of
      scheduled opening will be achieved or that these projects will be
      completed. In particular, in the case where a property is scheduled
      to open near the end of a year, there is a greater possibility that
      the year of opening could be changed. The process and risks
      associated with the management of new properties are dealt with in
      greater detail in our 2003 Annual Report.
  2.  We have made an investment in Orlando, which we expect to include a
      Four Seasons Residence Club and/or a Four Seasons branded residential
      component. The financing for this project has not yet been completed
      and therefore a scheduled opening date cannot be established at this
      time. We have also made an investment in Sedona at Seven Canyons in
      Arizona in connection with a potential Residence Club. The developer
      is working on a plan to finalize that project, however, there is no
      certainty that it will come to fruition as a Four Seasons property or
      the potential impact of those plans on Four Seasons' investment.


DATASOURCE: Four Seasons Hotels and Resorts



CONTACT: Douglas L. Ludwig, Chief Financial Officer, and Executive Vice

President, [phone]; Barbara Henderson, Vice President, Taxation and

Investor Relations, [phone]

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