Fairmont Hotels and Resorts announced net income for the second quarter of more than $40 million but said its Bermuda properties had seen lower demand than expected.

In an earnings press release issued yesterday, William R. Fatt, chief executive officer of FHR said the company had expected 2003 to be a "repositioning year" as it had only acquired some of its properties in late 2002.

However, Mr. Fatt said the the global hotel chain had expected group demand to be soft but that individual bookings had also been lower than expected including in Bermuda at the company's two hotels - the Fairmont Hamilton and at the Fairmont Southampton.

"Soft group demand was originally projected, individual leisure bookings have been weaker than initially expected," said Mr. Fatt, adding: "The Bermuda market is experiencing weaker demand generally than was originally projected. Consequently, performance at our two properties is expected to be in line with 2002 results although below our initial expectations for this year."

In general, Mr. Fatt said the hotel was operating in a difficult environment: "The lodging industry faced an exceptionally challenging environment during the second quarter as a result of severe acute respiratory syndrome (SARS), the war in Iraq and the ongoing weakness in the US and global economies.

"The unprecedented circumstances surrounding SARS, with regards to both the severity and speed at which it affected the Canadian industry, resulted in an inability to replace the drop in international travellers.

"Although we have taken reasonable measures to control costs during this period, our ability to reduce expenses in line with revenue declines has been adversely affected by these circumstances.

"We expect the effect of SARS to continue to have an impact on FHR's important third quarter," Mr. Fatt said.

In total the company's net income of $40.1 million compared favourably to the same period last year when the company posted earnings of $28.9 million. Operating revenue for the group stood at $174.4 million during the second quarter a jump of more than $20 million from the same period last year when revenue stood at $150.3 million.

But on a comparable basis, the hotel group said revenue per available room at Fairmont's managed hotels was down 5.9 percent while revenue per available room in the hotel's owned properties increased 0.4 percent. Favourable foreign exchange movements were said to have contributed to an improvement in overall results.

FHR is one of North America's leading owners and operators of luxury hotels and resorts with a managed portfolio of 80 luxury and first-class properties and more than 31,000 guestrooms in Canada, the United States, Mexico, Bermuda, Barbados and the United Arab Emirates.