HONG KONG (Reuters) ? Hong Kong-based luxury hotel group Mandarin Oriental International Ltd reported a 13 percent fall in annual profit yesterday, but said it hoped to benefit from signs of recovery in the travel sector.

The Bermuda-registered company, part of the Jardine Matheson Holdings Ltd. group, said underlying pre-tax profit fell to US$68.4 million from US$78.3 million a year ago, as the SARS virus in Asia hit group earnings.

Net profit plunged to US$3.1 million, compared with a restated earnings of US$15.7 million from a year-ago period.

The 2003 result included the receipt of a US$16 million settlement of insurance claims for business losses arising from the SARS outbreak.

"The first half was affected so much by SARS and by the war in Iraq," Chief Executive Edouard Ettedgui said in a telephone interview.

"But the second half was quite encouraging. I was actually quite surprised by the speed of recovery," Ettedgui said.

The group, which operates 19 hotels worldwide including the Elbow Beach in Bermuda, expects a rosier 2004 as it looks set to benefit from an upturn in both the leisure and corporate travel markets.

It also expects to see contributions from its recently-opened hotel in New York and another that will open in Washington next month.

Shares in Mandarin Oriental fell 3.6 percent to US$0.535 in Singapore ahead of the results.

Ettedgui said he was encouraged by rising occupancy in Asia, including Hong Kong, where the SARS virus hit especially hard.

Its flagship Mandarin Oriental in Hong Kong filled just 53 percent of its room compared with 69 percent the previous year. But business improved in the second half of 2003 as visitors from mainland China led a recovery in the city's tourism sector.

The company said plans to open new hotels in Hong Kong, Tokyo and Boston between 2005 and 2006 were on track.

The group also said it wants to establish a presence in mainland China, but provided no details.

"It's a matter of time," said Ettedgui.