Starwood Reports Strong Fourth Quarter and Full Year 2006 Results

Starwood Hotels & Resorts Worldwide, Inc. (NYSE: HOT) today reported strong fourth quarter 2006 financial results, driven by double-digit worldwide REVPAR increases and higher operating margins. Fourth Quarter 2006 Highlights Excluding special items, EPS from continuing operations was $0.92 compared to $0.71 for the fourth quarter of 2005. Including special items, EPS from continuing operations was $0.94 compared to $0.70 in the fourth quarter of 2005. Worldwide System-wide REVPAR for Same-Store Hotels increased 11.4% compared to the fourth quarter of 2005. System-wide REVPAR for Same-Store Hotels in North America increased 9.1% compared to the fourth quarter of 2005. Worldwide REVPAR for Starwood branded Same-Store Owned Hotels increased 11.7% compared to the fourth quarter of 2005. REVPAR for Starwood branded Same-Store Owned Hotels in North America increased 8.6% compared to the fourth quarter of 2005. Margins at Starwood branded Same-Store Owned Hotels Worldwide and in North America improved 280 and 153 basis points, respectively, as compared to the fourth quarter of 2005. Management and franchise revenues increased 54.8% over 2005, including revenues from the Le Méridien hotels and the hotels sold to Host. The Company signed 61 hotel management and franchise contracts in the quarter (representing approximately 12,500 rooms). For the full year, the Company signed 156 hotel management and franchise contracts (representing approximately 36,700 rooms). Excluding residential sales, contract sales at vacation ownership properties increased 15.0% over 2005. Reported revenues from vacation ownership and residential sales increased $130 million when compared to 2005. Strong increases in revenues from vacation ownership sales were partially offset by a decline in residential sales. Excluding special items, income from continuing operations was $199 million compared to $162 million in the same period of 2005. Net income, including special items, was $203 million compared to $159 million in the fourth quarter of 2005. Total Company Adjusted EBITDA was $383 million when compared to $391 million in 2005. The year over year reduction is due to the sale of 50 hotels since the beginning of the fourth quarter of 2005 and stock based compensation expense, offset in part by increases in management and franchise revenues. During the fourth quarter, the Company repurchased approximately 0.6 million shares at a cost of $34.2 million. For the full year, the Company repurchased 21.7 million shares at a cost of $1.263 billion. Starwood Hotels & Resorts Worldwide, Inc. ("Starwood” or the "Company”) today reported EPS from continuing operations for the fourth quarter of 2006 of $0.94 compared to $0.70 in the fourth quarter of 2005. Excluding special items, EPS from continuing operations was $0.92 for the fourth quarter of 2006 compared to $0.71 in the fourth quarter of 2005. Excluding special items, the effective income tax rate in the fourth quarter of 2006 was 21.4% including a $19 million benefit resulting from the recognition of certain tax credits related to 2005. Income from continuing operations was $203 million in the fourth quarter of 2006 compared to $159 million in 2005. Excluding special items, which net to a $4 million benefit in 2006, income from continuing operations was $199 million for the fourth quarter of 2006 compared to $162 million in 2005. Net income was $203 million and EPS was $0.93 in the fourth quarter of 2006 compared to net income of $159 million and EPS of $0.70 in the fourth quarter of 2005. Steven J. Heyer, CEO, said, "I am extremely proud of what Starwood accomplished this year and am even more excited about our positioning for 2007. With our fee business now the largest contributor to our bottom line, our broad global presence, our industry-leading pipeline, and our significant brand initiatives throughout 2006, we are transforming from a cyclical real estate business into a leading global lifestyle brand company. We emerged from 2006 with the right asset mix, a clear strategy, focus, process and discipline. By any measure, it is clear our new model has been paying off. Today, Starwood is a higher-growth, more capital-efficient, cash-rich and less-cyclical business.” Heyer continued: "Fourth quarter results were impressive, beating our guidance. While North America branded REVPAR at Same-Store Owned Hotels increased at the high end of our guidance, up 8.6%, Worldwide REVPAR jumped 11.7%. Importantly, this REVPAR growth had great flow-through at these hotels, driving North American and Worldwide margin increases of over 150 basis points and 280 basis points, respectively. Worldwide System-wide REVPAR increased 11.4% and managed and franchised revenues increased 54.8% in the quarter. Our pipeline’s upward trajectory is a testament to the strength of our branding initiatives, our development focus, and our emphasis on building relationships with the best development partners in the world. We signed 156 new long-term hotel contracts this year, the most in our history, and according to December 2006 Smith Travel data, our brands emerged as #1 overall in the upper-upscale and luxury development market, with 38% of the hotels and rooms in the pipeline today. This represents strong growth on an absolute basis, and significant market share gains. We have a leading position in the upper-upscale and luxury segments, and our global development group and brand teams are working to extend this lead. Revenues at our timeshare division grew 13% year over year, and we expect our St Regis, Westin and Sheraton brands to continue driving strong growth in this under-penetrated business. Contract sales were up 15% in the quarter due to the combination of higher pricing and additional units sold. We fully expect 2007 to be another great year for our company and we remain focused on our strategic initiatives – service excellence, brand development, pipeline development, vacation ownership growth, real estate development and repositionings. We believe that these initiatives will allow us to outperform the competition and continue to create value for our shareholders.” Operating Results Fourth Quarter Ended December 31, 2006 Management and Franchise Revenues Worldwide System-wide (owned, managed and franchised) REVPAR for Same-Store Hotels increased 11.4% compared to the fourth quarter of 2005 including 24.8% in Africa & the Middle East, 17.0% in Europe, 12.5% in Latin America, 11.2% in Asia Pacific and 9.1% in North America. The 9.1% increase in System-wide REVPAR for Same-Store Hotels in North America by brand was: St. Regis/Luxury Collection 15.7%, W Hotels 13.5%, Westin 9.8% and Sheraton 7.7%. Management fees, franchise fees and other income were $209 million, up $57 million, or 37.5%, from the fourth quarter of 2005. Management fees grew 57.4% to $107 million and franchise fees grew 34.8% to $31 million. The increases are related to the addition of new hotels (including Le Méridien hotels and the hotels sold to third parties, including Host Hotels & Resorts, Inc. ("Host”)), and growth in REVPAR of existing hotels under management, offset in part by fees associated with hotels that left the system. The hotels sold to Host contributed $28 million, and the Le Méridien hotels added $16 million, respectively, of management and franchise revenues during the fourth quarter of 2006. The Le Méridien hotels contributed $5 million in the same quarter of 2005 as the Company acquired that business at the end of November of 2005. Excluding the hotels sold to Host, and fees from Le Meridien, management and franchise revenues increased 18.2% in the fourth quarter of 2006 when compared to 2005. Worldwide Le Méridien hotels that were in operation during both periods had REVPAR growth of 21.8% in the fourth quarter of 2006 when compared to 2005 with ADR increasing 16.8% and occupancy increasing 290 basis points. During the fourth quarter of 2006, the Company signed 61 hotel management and franchise contracts (representing approximately 12,500 rooms: 15 Sheraton, 15 aloft, 11 Four Points by Sheraton, 9 Westin, 3 W Hotels, 2 Le Méridien, 2 Luxury Collection, 2 St. Regis, and 2 Element). Of the hotels signed in the quarter, 46 were new builds and 15 were conversions from other brands. For the full year, the Company signed 156 hotel management and franchise contracts (representing approximately 36,700 rooms). The Company now has roughly 400 hotels in the active pipeline and almost 100,000 rooms at December 31, 2006, driven by strong interest in all Starwood brands. Approximately half of the pipeline is in international locations. During the fourth quarter of 2006, 18 new hotels and resorts (representing approximately 4,400 rooms) entered the system, including The Westin Chicago North Shore (Wheeling, Illinois, 411 rooms), The U.S. Grant (San Diego, California, 270 rooms) and The Westin St. Maarten, Dawn Beach Resort & Spa (St. Maarten, Netherland Antilles, 416 rooms). Eight properties (representing approximately 1,700 rooms) were removed from the system during the quarter. The Company expects to open more than 80 hotels (representing approximately 20,000 rooms) in 2007 and is targeting signing approximately 200 hotel management and franchise contracts in 2007. Owned, Leased and Consolidated Joint Venture Hotels Worldwide REVPAR for Starwood branded Same-Store Owned Hotels increased 11.7%. REVPAR at Starwood branded Same-Store Owned Hotels in North America increased 8.6%. REVPAR growth was particularly strong at the Company’s owned hotels in Chicago, New York, Phoenix, and San Diego. Internationally, Starwood branded Same-Store Owned Hotel REVPAR increased 12.5% excluding the impact of foreign exchange, and as reported, in US dollars, branded Same-Store Owned Hotel REVPAR increased 17.5%. Revenues at Starwood branded Same-Store Owned Hotels in North America increased 8.3% while costs and expenses increased 6.1% when compared to 2005. Margins at these hotels increased 153 basis points. Revenues at Starwood branded Same-Store Owned Hotels Worldwide increased 10.6% while costs and expenses increased 6.5% when compared to 2005. Margins at these hotels increased 280 basis points. Reported revenues at owned, leased and consolidated joint venture hotels were $602 million when compared to $894 million in 2005. Reported revenues and operating income were impacted by the sale of 50 hotels since the beginning of the fourth quarter of 2005. These hotels had $2 million of revenues and $1 million of expenses (before depreciation) in 2006 as compared to $358 million of revenues and $254 million of expenses (before depreciation) in the same quarter of 2005. Vacation Ownership While contract sales of vacation ownership intervals were up 15.0%, total vacation ownership reported revenues increased 108.1% to $310 million when compared to 2005 due primarily to the timing of the recognition of deferred revenues under percentage of completion accounting for pre-sales at projects under construction. The average price per vacation ownership unit sold increased 11.2% to approximately $27,000, and the number of contracts signed increased 3.5% when compared to 2005. During the fourth quarter of 2006, the Company was actively selling vacation ownership interests at 15 resorts. Starwood Vacation Ownership is also in the predevelopment phase of several other new vacation ownership resorts in California, Colorado, Hawaii, Mexico and Aruba. During the fourth quarter of 2006, the Company sold approximately $133 million of vacation ownership notes receivable and recognized gains of $17 million as compared to gains of $25 million in the same period of 2005. Residential During the fourth quarter of 2006, the Company recognized residential revenues of approximately $12 million primarily from sales at the St. Regis in New York. To date, the Company has recognized approximately $40.7 million in revenues from the sale of condominiums at the St. Regis in New York. In the fourth quarter of 2005, the Company recognized residential revenues of $43.0 million primarily associated with sales at the St. Regis Museum Tower in San Francisco which sold out in the first half of 2006. Selling, General, Administrative and Other Selling, general, administrative and other expenses increased 33.3% to $128 million compared to the fourth quarter of 2005. Approximately one-third of the increase is due to the impact of stock-based compensation, including stock option expense. The remaining increase includes investments in our global development capability, and costs associated with the launch of the Company’s new brands, aloft and Element, as well as the addition of the Le Méridien business. Asset Sales During the fourth quarter of 2006, the Company sold two wholly-owned hotels for cash proceeds of approximately $29 million. Additionally, the Company received proceeds of approximately $20 million from the sales of two unconsolidated joint ventures in the fourth quarter of 2006. Capital Gross capital spending during the quarter included approximately $55 million in renovations of hotel assets including construction capital at the Sheraton Centre Toronto Hotel, the Westin Cancun Resort & Spa, and the Westin Maui Resort. Investment spending on gross vacation ownership interest ("VOI”) inventory was $107 million, which was offset by cost of sales of $74 million associated with VOI sales during the quarter. The inventory spend included VOI construction at the Westin Ka’anapali Ocean Resort Villas North in Maui, the Westin Princeville Resort in Kauai, the Westin Kierland Resort in Arizona, Sheraton’s Vistana Villages in Orlando, and the Westin Lagunamar Resort in Cancun. Share Repurchase During the fourth quarter of 2006, the Company repurchased approximately 0.6 million shares at a total cost of approximately $34.2 million. Since January 1, 2006, the Company has returned more than $4.3 billion to shareholders, including $2.8 billion in connection with the sale of 33 hotels to Host, approximately $1.263 billion for the repurchase of approximately 21.7 million shares of its stock and $276 million in dividends. At December 31, 2006, approximately $380 million remained available under the Company’s share repurchase authorization. Starwood had approximately 214 million shares outstanding (including partnership units) at December 31, 2006. Dividend The Company’s former REIT subsidiary paid dividends of $0.21 per share for each of the first and second quarters of 2006. The remaining 2006 dividend of $0.42 per share was declared by the Board of Directors in December 2006 and paid by the Company on January 19, 2007. Balance Sheet At December 31, 2006, the Company had total debt of $2.632 billion and cash and cash equivalents (including $336 million of restricted cash) of $519 million, or net debt of $2.113 billion, compared to net debt of $2.437 billion at the end of the third quarter of 2006. At December 31, 2006, debt was approximately 67% fixed rate and 33% floating rate and its weighted average maturity was 4.4 years with a weighted average interest rate of 6.97%. The Company had cash (including total restricted cash) and availability under domestic and international revolving credit facilities of approximately $1.867 billion. Results for the Twelve Months Ended December 31, 2006 EPS from continuing operations increased to $5.01 compared to $1.88 in 2005. Excluding special items, EPS from continuing operations was $2.73 compared to $2.34 in 2005. Excluding special items, income from continuing operations was $607 million compared to $526 million in 2005. Net income was $1.043 billion and EPS was $4.69 compared to $422 million and $1.88, respectively, in 2005. Total Company Adjusted EBITDA, which was significantly impacted by the sale of 56 hotels since the beginning of 2005, was $1.309 billion compared to $1.417 billion in 2005. Outlook The Company’s 2007 Guidance assumes the following changes since we last provided guidance: The sale of two unconsolidated joint ventures in the fourth quarter of 2006 The expected sale of 14 owned hotels and 8 hotels in unconsolidated joint ventures in 2007 with anticipated gross proceeds of $475 million to $500 million. Most sales are expected to be completed in the first half of 2007. For the Full year 2007: Adjusted EBITDA is expected to be approximately $1.365 billion prior to anticipated asset sales. Adjusting for the asset sales mentioned above, 2007 Adjusted EBITDA is expected to be approximately $1.335 billion, assuming: -- REVPAR growth at Company operated (Owned and Managed) hotels worldwide of 8% to 10% -- REVPAR growth at Same-Store Owned Hotels in North America of 7% to 9% -- North America Same-Store Owned Hotel EBITDA growth of 12% to 14% with margin improvement of 100 to 150 basis points at these hotels -- Growth from management and franchise revenues of approximately 17% to 19% including revenues earned from the hotels sold to Host, and 13% to 15% excluding the hotels sold to Host -- An increase in operating income from our vacation ownership and residential business of $45 to $55 million (including gains on sale of vacation ownership notes receivable) Income from continuing operations, before special items, is expected to be approximately $543 million reflecting an effective tax rate of approximately 33%. EPS before special items is expected to be approximately $2.50 Full year capital expenditures (excluding timeshare inventory) would be approximately $650 million, including $300 million for maintenance, renovation and technology and $350 million for other growth initiatives, including the Bal Harbour project. Additionally, net capital expenditures for timeshare inventory would be approximately $150 million. Full year depreciation and amortization expense would be approximately $340 million Full year cash interest expense would be approximately $184 million and cash taxes of approximately $240 million. Reconciliation to reflect the sale of assets completed in Q4 2006 and assets expected to be sold in 2007 (in millions)   2007 Adjusted EBITDA Guidance $ 1,365    Adjustments to estimate the sale of 14 owned hotels sold in Q4 2006 or expected to be sold in 2007   Less: Revenues from hotels sold in Q4 2006 or expected to be sold in 2007 (94)   Add: Expenses from hotels sold in Q4 2006 or expected to be sold in 2007 73    Add: Expected fees from hotels sold or expected to be sold encumbered by management or franchise contracts 2    Adjustments to estimate the sale of 10 JV assets sold in Q4 2006 or expected to be sold in 2007   Less: Earnings from unconsolidated JV hotels sold or expected to be sold (11)   2007 Adjusted EBITDA Guidance to reflect asset sales $ 1,335  For the three months ended March 31, 2007: Adjusted EBITDA is expected to be $255 million assuming: -- REVPAR growth at Company operated (Owned and Managed) hotels worldwide of 8% to 10% -- REVPAR growth at Same-Store Owned Hotels in North America of 8% to 10% -- North America Same-Store Owned Hotel EBITDA growth of 13% to 15% with margin improvement of 100 to 150 basis points at these hotels -- Growth from management and franchise revenues of approximately 35% to 40% including revenues earned from the hotels sold to Host, and 13% to 15% excluding the hotels sold to Host -- An increase in operating income from our vacation ownership and residential business of $15 to $20 million Income from continuing operations, before special items, is expected to be approximately $83 million reflecting an effective tax rate of approximately 33%. EPS before special items is expected to be approximately $0.38. Special Items The Company recorded net credits of $4 million (after-tax) for special items in the fourth quarter of 2006 compared to $3 million of net charges (after-tax) in the same period of 2005. Special items in the fourth quarter of 2006 primarily relate to restructuring and other special charges, and additional one-time income tax benefits realized in connection with the Host transaction. The following represents a reconciliation of income from continuing operations before special items to income from continuing operations after special items (in millions, except per share data): Three Months Ended December 31, Year Ended December 31, 2006  2005  2006  2005    $ 199  $ 162  Income from continuing operations before special items $ 607  $ 526  $ 0.92  $ 0.71  EPS before special items $ 2.73  $ 2.34    Special Items (9) (13) Restructuring and other special charges, net (a) (20) (13) —  —  Debt defeasance costs (b) (37) —  —  —  Debt extinguishment costs (c) (7) —  (4) 2  (Loss) gain on asset dispositions and impairments, net (d) (3) (30) (13) (11) Total special items – pre-tax (67) (43) 7  5  Income tax benefit for special items (e) 28  16  10  —  Income tax benefits related to the transaction with Host (f) 524  —  —  —  Tax expense and repatriation of foreign earnings —  (47) —  3  Reserves and credits associated with tax matters (g) 23  (29) 4  (3) Total special items – after-tax 508  (103)   $ 203  $ 159  Income from continuing operations $ 1,115  $ 423  $ 0.94  $ 0.70  EPS including special items $ 5.01  $ 1.88    (a) During the three months ended December 31, 2006, the loss is primarily related to severance costs related to certain executives and transition costs associated with the Le Méridien transaction. For the twelve months ended December 31, 2006, the charge includes additional Le Méridien transition costs offset, in part, by the reversal of ITT acquisition reserves. During 2005, the Company recorded $13 million primarily related to severance costs in connection with the Company’s restructuring as a result of its planned disposition of significant real estate assets and Le Méridien transition costs.   (b) During the three months ended March 31, 2006, the Company completed two transactions whereby it was released from certain debt obligations that allowed Starwood to sell certain hotels that previously served as collateral for such debt. The Company incurred expenses totaling $37 million in connection with the early extinguishment of these debt obligations. These expenses are reflected in interest expense in the Company’s consolidated statement of income.   (c) During the three months ended June 30, 2006, the Company incurred costs of approximately $7 million related to the early extinguishment of $150 million of debentures issued by its former subsidiary, Sheraton Holding Corporation. These expenses are reflected in interest expense in the Company’s consolidated statement of income.   (d) For the three months ended December 31, 2006, primarily reflects $20 million in losses recognized in connection with the impairment of two properties, one of which is expected to be demolished and rebuilt under the aloft and Element brands and another which represents land that was sold to a developer who plans to build a Starwood hotel, partially offset by a $16 million gain on the sale of the Company’s interest in a joint venture. For the twelve months ended December 31, 2006, the balance also includes losses and impairment charges of approximately $54 million on the sale of hotels offset by gains on the sale of hotels and joint ventures and insurance proceeds of approximately $55 million. The three months ended December 31, 2005 reflect gains recorded on 3 hotel sales and the loss for the twelve months ended December 31, 2005 is related to losses on the sale or impairment of hotels.   (e) Represents taxes on special items at the Company’s incremental tax rate.   (f) Primarily relates to a deferred tax asset recognized on the deferred gain and other one-time tax benefits realized in connection with the Host sale.   (g) Income tax benefit for the year ended December 31, 2006 primarily relates to the reversal of tax reserves no longer deemed necessary as the related contingencies have been resolved. Income tax expense in the three and twelve months ended December 31, 2005 is due to increases in tax reserves related to the Company’s 1998 disposition of the World Directories business, offset by tax refunds related to the 1995 split-up of ITT Corporation. The Company has included the above supplemental information concerning special items to assist investors in analyzing Starwood’s financial position and results of operations. The Company has chosen to provide this information to investors to enable them to perform meaningful comparisons of past, present and future operating results and as a means to emphasize the results of core on-going operations. Starwood will be conducting a conference call to discuss the fourth quarter financial results at 10:30 a.m. (EST) today at (719) 457-2698. The conference call will be available through simultaneous webcast in the Investor Relations/Press Releases section of the Company’s website at http://www.starwoodhotels.com. A replay of the conference call will also be available from 12:30 p.m. (EST) today through Thursday, February 8 at 12:00 midnight (EST) on both the Company’s website and via telephone replay at (719) 457-0820 (access code 4726733). Definitions All references to EPS, unless otherwise noted, reflect earnings per diluted share from continuing operations. All references to "net capital expenditures” mean gross capital expenditures for timeshare and fractional inventory net of cost of sales. EBITDA represents net income before interest expense, taxes, depreciation and amortization. The Company believes that EBITDA is a useful measure of the Company’s operating performance due to the significance of the Company’s long-lived assets and level of indebtedness. EBITDA is a commonly used measure of performance in its industry which, when considered with GAAP measures, the Company believes gives a more complete understanding of the Company’s operating performance. It also facilitates comparisons between the Company and its competitors. The Company’s management has historically adjusted EBITDA (i.e., "Adjusted EBITDA”) when evaluating operating performance for the total Company as well as for individual properties or groups of properties because the Company believes that the inclusion or exclusion of certain recurring and non-recurring items, such as revenues and costs and expenses from hotels sold, restructuring and other special charges and gains and losses on asset dispositions and impairments, is necessary to provide the most accurate measure of core operating results and as a means to evaluate comparative results. The Company’s management also uses Adjusted EBITDA as a measure in determining the value of acquisitions and dispositions and it is used in the annual budget process. Due to guidance from the Securities and Exchange Commission, the Company now does not reflect such items when calculating EBITDA; however, the Company continues to adjust for these special items and refers to this measure as Adjusted EBITDA. The Company has historically reported this measure to its investors and believes that the continued inclusion of Adjusted EBITDA provides consistency in its financial reporting and enables investors to perform more meaningful comparisons of past, present and future operating results and provides a means to evaluate the results of its core on-going operations. EBITDA and Adjusted EBITDA are not intended to represent cash flow from operations as defined by GAAP and such metrics should not be considered as an alternative to net income, cash flow from operations or any other performance measure prescribed by GAAP. The Company’s calculation of EBITDA and Adjusted EBITDA may be different from the calculations used by other companies and, therefore, comparability may be limited. All references to Same-Store Owned Hotels reflect the Company’s owned, leased and consolidated joint venture hotels, excluding hotels sold to date, undergoing significant repositionings or for which comparable results are not available (i.e., hotels not owned during the entire periods presented or closed due to seasonality or hurricane damage). REVPAR is defined as revenue per available room. ADR is defined as average daily rate. All references to contract sales or originated sales reflect vacation ownership sales before revenue adjustments for percentage of completion accounting methodology. All references to management and franchise revenues represent base and incentive fees, franchise fees, amortization of deferred gains resulting from the sales of hotels subject to long-term management contracts and termination fees offset by payments by Starwood under performance and other guarantees. Starwood Hotels & Resorts Worldwide, Inc. is one of the leading hotel and leisure companies in the world with approximately 870 properties in more than 100 countries and 145,000 employees at its owned and managed properties. Starwood® Hotels is a fully integrated owner, operator and franchisor of hotels and resorts with the following internationally renowned brands: St. Regis®, The Luxury Collection®, W®, Westin®, Le Méridien®, Sheraton®, Four Points® by Sheraton, aloft(SM), and Element(SM). Starwood Hotels also owns Starwood Vacation Ownership, Inc., one of the premier developers and operators of high quality vacation interval ownership resorts. For more information, please visit www.starwoodhotels.com. ** Please contact Starwood's new, toll-free media hotline at (866) 4-STAR-PR (866-478-2777) for photography or additional information.** Note: This press release contains forward-looking statements within the meaning of federal securities regulations. Forward-looking statements are not guarantees of future performance and involve risks and uncertainties and other factors that may cause actual results to differ materially from those anticipated at the time the forward-looking statements are made. Further results, performance and achievements may be affected by general economic conditions including the impact of war and terrorist activity, business and financing conditions, foreign exchange fluctuations, cyclicality of the real estate (including residential) and the hotel and vacation ownership businesses, operating risks associated with the hotel, vacation ownership and residential businesses, relationships with associates and labor unions, customers and property owners, the impact of the internet reservation channels, our reliance on technology, domestic and international political and geopolitical conditions, competition, governmental and regulatory actions (including the impact of changes in U.S. and foreign tax laws and their interpretation), travelers’ fears of exposure to contagious diseases, risk associated with the level of our indebtedness, risk associated with potential acquisitions and dispositions, and the introduction of new brand concepts and other risks and uncertainties. These risks and uncertainties are presented in detail in our filings with the Securities and Exchange Commission. Future vacation ownership units indicated in this press release include planned units on land owned by the Company or by joint ventures in which the Company has an interest that have received all major governmental land use approvals for the development of vacation ownership resorts. There can be no assurance that such units will in fact be developed and, if developed, the time period of such development (which may be more than several years in the future). Some of the projects may require additional third-party approvals or permits for development and build out and may also be subject to legal challenges as well as a commitment of capital by the Company. The actual number of units to be constructed may be significantly lower than the number of future units indicated. Although we believe the expectations reflected in such forward-looking statements are based upon reasonable assumptions, we can give no assurance that our expectations will be attained or that results will not materially differ. We undertake no obligation to publicly update or revise any forward-looking statement, whether as a result of new information, future events or otherwise. STARWOOD HOTELS & RESORTS WORLDWIDE, INC. UNAUDITED CONSOLIDATED STATEMENTS OF INCOME (In millions, except per Share data)   Three Months Ended December 31, Year Ended December 31, 2006  2005  % Variance 2006  2005  % Variance Revenues $ 602  $ 894  (32.7) Owned, leased and consolidated joint venture hotels $ 2,692  $ 3,517  (23.5) 322  192  67.7  Vacation ownership and residential sales and services(a) 1,005  889  13.0  209  152  37.5  Management fees, franchise fees and other income 697  501  39.1  439  278  57.9  Other revenues from managed and franchised properties (b) 1,585  1,070  48.1  1,572  1,516  3.7  5,979  5,977  0.0  Costs and Expenses 448  672  33.3  Owned, leased and consolidated joint venture hotels 2,023  2,634  23.2  204  158  (29.1) Vacation ownership and residential 736  661  (11.3) 128  96  (33.3) Selling, general, administrative and other 470  370  (27.0) 9  13  30.8  Restructuring and other special charges, net 20  13  (53.8) 70  82  14.6  Depreciation 280  387  27.6  5  7  28.6  Amortization 26  20  (30.0) 439  278  (57.9) Other expenses from managed and franchised properties (b) 1,585  1,070  (48.1) 1,303  1,306  0.2  5,140  5,155  0.3  269  210  28.1  Operating income 839  822  2.1  —  25  (100.0) Gain on sale of VOI notes receivable —  25  (100.0) 15  24  (37.5) Equity earnings and gains and losses from unconsolidated ventures, net 61  64  (4.7) (40) (58) 31.0  Interest expense, net of interest income of $3, $8, $29 and $19 (215) (239) 10.0  (4) 2  n/m  (Loss) gain on asset dispositions and impairments, net (3) (30) 90.0  240  203  18.2  Income from continuing operations before taxes and minority equity 682  642  6.2  (36) (44) n/m  Income tax (expense) benefit 434  (219) n/m  (1) —  n/m  Minority equity in net income (1) —  n/m  203  159  n/m  Income from continuing operations 1,115  423  n/m  Discontinued Operations: —  —  —  Loss from operations —  (1) n/m  (2) —  n/m  Net loss on dispositions ( (2) —  n/m  2  —  n/m  Cumulative effect of accounting change ( (70) —  n/m  $ 203  $ 159  n/m  Net income $ 1,043  $ 422  n/m  Earnings (Loss) Per Share – Basic $ 0.98  $ 0.72  n/m  Continuing operations $ 5.25  $ 1.95  n/m  (0.01) —  n/m  Discontinued operations (0.01) —  n/m  —  —  —  Cumulative effect of accounting change (0.33) —  n/m  $ 0.97  $ 0.72  n/m  Net income $ 4.91  $ 1.95  n/m  Earnings (Loss) Per Share – Diluted $ 0.94  $ 0.70  n/m  Continuing operations $ 5.01  $ 1.88  n/m  (0.01) —  n/m  Discontinued operations (0.01) —  n/m  —  —  —  Cumulative effect of accounting change (0.31) —  n/m  $ 0.93  $ 0.70  n/m  Net income $ 4.69  $ 1.88  n/m    208  219  Weighted average number of Shares 213  217  217  228  Weighted average number of Shares assuming dilution 223  225    (a) Includes gains on sales of vacation ownership notes receivable of $17 million in the three and twelve months ended December 31, 2006.   (b) The Company includes in revenues the reimbursement of costs incurred on behalf of managed hotel property owners and franchisees with no added margin and includes in costs and expenses these reimbursed costs. These costs relate primarily to payroll costs at managed properties where the Company is the employer.   n/m = not meaningful STARWOOD HOTELS & RESORTS WORLDWIDE, INC. CONSOLIDATED BALANCE SHEETS (in millions, except share data)   December 31, 2006 December 31, 2005 (unaudited) Assets Current assets: Cash and cash equivalents $ 183  $ 897  Restricted cash 329  295  Accounts receivable, net of allowance for doubtful accounts of $49 and $50 593  642  Inventories 566  280  Prepaid expenses and other 139  169  Total current assets 1,810  2,283  Investments 436  403  Plant, property and equipment, net 3,831  4,169  Assets held for sale (a) 2  2,882  Goodwill and intangible assets, net 2,302  2,315  Deferred tax assets 530  40  Other assets (b) 381  402  $ 9,292  $ 12,494  Liabilities and Stockholders’ Equity Current liabilities: Short-term borrowings and current maturities of long-term debt (c) $ 805  $ 1,219  Accounts payable 179  156  Accrued expenses 955  1,049  Accrued salaries, wages and benefits 383  297  Accrued taxes and other 153  158  Total current liabilities 2,475  2,879  Long-term debt (c) 1,827  2,849  Long-term debt held for sale (d) —  77  Deferred tax liabilities 28  602  Other liabilities 1,928  851  6,258  7,258  Minority interest 25  25  Commitments and contingencies Stockholders’ equity: Class A exchangeable preferred shares of the Trust; $0.01 par value; authorized 30,000,000 shares; outstanding 0 and 562,222 shares at December 31, 2006 and December 31, 2005, respectively —  —  Class B exchangeable preferred shares of the Trust; $0.01 par value; authorized 15,000,000 shares; outstanding 0 and 24,627 shares at December 31, 2006 and December 31, 2005, respectively —  —  Corporation common stock; $0.01 par value; authorized 1,050,000,000 213,484,439 and 217,218,781 shares at December 31, 2006 and December 31, 2005, respectively 2  2  Trust Class B shares of beneficial interest; $0.01 par value; authorized 1,000,000,000 shares; outstanding 0 and 217,218,781 shares at December 31, 2006 and December 31, 2005, respectively —  2  Additional paid-in capital 2,286  5,412  Deferred compensation —  (53) Accumulated other comprehensive loss (227) (322) Retained earnings 948  170  Total stockholders’ equity 3,009    5,211  $ 9,292    $ 12,494    (a) At December 31, 2006, reflects land which is considered held for sale. At December 31, 2005, includes 33 hotels that were sold in the second quarter of 2006 in connection with the definitive agreement signed on November 14, 2005 with Host Hotels & Resorts, Inc. and 3 hotels that had signed definitive agreements at December 31, 2005 and were sold in the first quarter of 2006.   (b) Includes restricted cash of $7 million and $12 million at December 31, 2006 and December 31, 2005, respectively.   (c) Excludes Starwood’s share of unconsolidated joint venture debt aggregating approximately $484 million and $469 million at December 31, 2006 and December 31, 2005, respectively.   (d) Represents the debt that was assumed by Host in connection with the definitive agreement signed on November 14, 2005. STARWOOD HOTELS & RESORTS WORLDWIDE, INC. Non-GAAP to GAAP Reconciliations – Historical Data (in millions)   Three Months Ended December 31, Year Ended December 31, 2006  2005  % Variance 2006  2005  % Variance   Reconciliation of Net Income to EBITDA and Adjusted EBITDA $ 203  $ 159  n/m  Net income $ 1,043  $ 422  n/m  47  76  (38.2) Interest expense(a) 263  283  (7.1) 38  44  n/m  Income tax (benefit) expense(b) (432) 218  n/m  78  93  (16.1) Depreciation(c) 311  423  (26.5) 6  8  (25.0) Amortization (d) 31  26  19.2  372  380  (2.1) EBITDA 1,216  1,372  (11.4) 4  (2) n/m  Loss (gain) on asset dispositions and impairments, net 3  30  (90.0) 9  13  (30.8) Restructuring and other special charges, net 20  13  53.8  —  —  —  Discontinued operations —  2  n/m  (2) —  n/m  Cumulative effect of accounting change 70  —  n/m  $ 383  $ 391  (2.0) Adjusted EBITDA $ 1,309  $ 1,417  (7.6)   (a) Includes $4 million and $10 million of interest expense related to unconsolidated joint ventures for the three months ended December 31, 2006 and 2005, respectively, and $19 million and $25 million for the year ended December 31, 2006 and 2005, respectively.   (b) Includes $2 million and $0 million of tax (benefit) expense recorded in discontinued operations for the three months ended December 31, 2006 and 2005, respectively, and $2 million and $1 million for the year ended December 31, 2006 and 2005, respectively.   (c) Includes $8 million and $11 million of Starwood’s share of depreciation expense of unconsolidated joint ventures for the three months ended December 31, 2006 and 2005, respectively, and $31 million and $36 million for the year ended December 31, 2006 and 2005, respectively.   (d) Includes $1 million of Starwood’s share of amortization expense of unconsolidated joint ventures for the three months ended December 31, 2006 and 2005, and $5 million and $6 million for the year ended December 31, 2006 and 2005, respectively. STARWOOD HOTELS & RESORTS WORLDWIDE, INC. Non-GAAP to GAAP Reconciliations – Future Performance (In millions)   Three Months Ended March 31, 2007 Year Ended December 31, 2007   $ 83  Net income $ 543  46  Interest expense 184  41  Income tax expense 268  85  Depreciation and amortization 340  255  EBITDA 1,335  —  Gain on asset disposition and impairments, net —  —  Restructuring and other special charges, net —  $ 255  Adjusted EBITDA $ 1,335  Three Months Ended March 31, 2007 Year Ended December 31, 2007   $ 83  Income from continuing operations 543  $ 0.38  EPS $ 2.50    Special Items —  Restructuring and other special charges, net —  —  Gain on asset dispositions and impairments, net —  —  Total special items – pre-tax —  —  Income tax (benefit) expense on special items —  —  Total special items – after-tax —    $ 83  Income from continuing operations excluding special items $ 543  $ 0.38  EPS excluding special items $ 2.50  STARWOOD HOTELS & RESORTS WORLDWIDE, INC. Non-GAAP to GAAP Reconciliations – Same Store Owned Hotel Revenue and Expenses (In millions)   Three Months Ended December 31, Year Ended December 31, 2006  2005  % Variance Same-Store Owned Hotels (1) Worldwide 2006  2005  % Variance   Revenue $ 512  $ 466  9.8  Same-Store Owned Hotels $ 1,942  $ 1,785  8.8  2  358  (99.3) Hotels Sold or Closed in 2006 and 2005 (56 hotels) 384  1,422  (73.0) 88  70  27.2  Hotels Without Comparable Results (11 hotels) 359  304  18.3  —  —  —  Other ancillary hotel operations 7  6  7.7  $ 602  $ 894  (32.7) Total Owned, Leased and Consolidated Joint Venture Hotels Revenue $ 2,692  $ 3,517  (23.5)   Costs and Expenses $ 377  $ 356  (6.1) Same-Store Owned Hotels $ 1,443  $ 1,361  (6.0) 1  254  99.7  Hotels Sold or Closed in 2006 and 2005 (56 hotels) 293  1,026  71.4  70  62  13.5  Hotels Without Comparable Results (11 hotels) 283  243  (16.4) —  —  —  Other ancillary hotel operations 4  4  (2.1) $ 448  $ 672  33.3  Total Owned, Leased and Consolidated Joint Venture Hotels Costs and Expenses $ 2,023  $ 2,634  23.2      Three Months Ended December 31, Year Ended December 31, 2006  2005  % Variance Same-Store Owned Hotels North America 2006  2005  % Variance   Revenue $ 332  $ 309  7.3  Same-Store Owned Hotels $ 1,255  $ 1,148  9.3  1  298  (99.7) Hotels Sold or Closed in 2006 and 2005 (45 hotels) 311  1,168  (73.4) 76  62  23.9  Hotels Without Comparable Results (8 hotels) 315  255  23.4  $ 409  $ 669  (38.8) Total Owned, Leased and Consolidated Joint Venture Hotels Revenue $ 1,881  $ 2,571  (26.8)   Costs and Expenses $ 245  $ 233  (5.5) Same-Store Owned Hotels $ 925  $ 868  (6.5) 1  210  (99.7) Hotels Sold or Closed in 2006 and 2005 (45 hotels) 242  846  (71.3) 61  54  13.2  Hotels Without Comparable Results (8 hotels) 250  208  20.5  $ 307  $ 497  38.2  Total Owned, Leased and Consolidated Joint Venture Hotels Costs and Expenses $ 1,417  $ 1,922  26.3    Three Months Ended December 31, Year Ended December 31, 2006  2005  % Variance Same-Store Owned Hotels International 2006  2005  % Variance   Revenue $ 180  $ 157  14.7  Same-Store Owned Hotels $ 687  $ 637  7.8  1  60  (97.9) Hotels Sold or Closed in 2006 and 2005 (11 hotels) 73  254  (71.2) 12  8  54.5  Hotels Without Comparable Results (3 hotels) 44  49  (8.6) —  —  —  Other ancillary hotel operations 7  6  7.7  $ 193  $ 225  (14.3) Total Owned, Leased and Consolidated Joint Venture Hotels Revenue $ 811  $ 946  (14.3)   Costs and Expenses $ 132  $ 123  (7.3) Same-Store Owned Hotels $ 518  $ 493  (5.1) —  44  (100.1) Hotels Sold or Closed in 2006 and 2005 (11 hotels) 51  180  (71.5) 9  8  15.5  Hotels Without Comparable Results (3 hotels) 33  35  (7.8) —  —  —  Other ancillary hotel operations 4  4  2.1  $ 141  $ 175  19.3  Total Owned, Leased and Consolidated Joint Venture Hotels Costs and Expenses $ 606  $ 712  14.9    (1) Same-Store Owned Hotel Results exclude 56 hotels sold or closed in 2006 and 2005 and 11 hotels without comparable results; Starwood Hotels & Resorts Worldwide, Inc. Worldwide Hotel Results - Same Store For the Three Months Ended December 31, 2006 UNAUDITED   System Wide (1) - Worldwide System Wide (1) - North America System Wide (1) - International 2006  2005  Var. 2006  2005  Var. 2006  2005  Var.     TOTAL HOTELS REVPAR ($) 109.09  97.90  11.4% 108.66  99.59  9.1% 109.80  95.11  15.4% ADR ($) 160.67  147.02  9.3% 159.26  148.20  7.5% 163.02  145.01  12.4% OCCUPANCY (%) 67.9% 66.6% 1.3  68.2% 67.2% 1.0  67.4% 65.6% 1.8      SHERATON REVPAR ($) 99.48  88.80  12.0% 97.89  90.92  7.7% 101.33  86.34  17.4% ADR ($) 148.19  134.75  10.0% 145.93  136.93  6.6% 150.81  132.18  14.1% OCCUPANCY (%) 67.1% 65.9% 1.2  67.1% 66.4% 0.7  67.2% 65.3% 1.9      WESTIN REVPAR ($) 125.18  113.74  10.1% 122.67  111.77  9.8% 133.12  119.96  11.0% ADR ($) 180.23  166.36  8.3% 176.46  163.43  8.0% 192.24  175.60  9.5% OCCUPANCY (%) 69.5% 68.4% 1.1  69.5% 68.4% 1.1  69.2% 68.3% 0.9      ST. REGIS/LUXURY COLLECTION REVPAR ($) 199.39  171.83  16.0% 190.85  164.99  15.7% 205.81  176.98  16.3% ADR ($) 311.48  286.57  8.7% 292.05  275.74  5.9% 326.65  294.70  10.8% OCCUPANCY (%) 64.0% 60.0% 4.0  65.4% 59.8% 5.6  63.0% 60.1% 2.9      W REVPAR ($) 233.81  209.66  11.5% 243.07  214.21  13.5% 145.26  166.22  -12.6% ADR ($) 310.49  287.82  7.9% 314.79  289.08  8.9% 254.84  273.17  -6.7% OCCUPANCY (%) 75.3% 72.8% 2.5  77.2% 74.1% 3.1  57.0% 60.8% -3.8      FOUR POINTS REVPAR ($) 65.94  59.65  10.5% 63.57  57.82  9.9% 72.71  65.03  11.8% ADR ($) 99.93  92.90  7.6% 98.23  91.80  7.0% 104.44  95.92  8.9% OCCUPANCY (%) 66.0% 64.2% 1.8  64.7% 63.0% 1.7  69.6% 67.8% 1.8      OTHER REVPAR ($) 108.66  105.23  3.3% 108.66  105.23  3.3% ADR ($) 139.09  131.30  5.9% 139.09  131.30  5.9% OCCUPANCY (%) 78.1% 80.1% -2.0  78.1% 80.1% -2.0        (1) Includes same store owned, leased, managed, and franchised hotels Starwood Hotels & Resorts Worldwide, Inc. Worldwide Hotel Results - Same Store For the Three Months Ended December 31, 2006 UNAUDITED   System Wide (1) Company Operated (2) 2006  2005  Var. 2006  2005  Var.     TOTAL WORLDWIDE REVPAR ($) 109.09  97.90  11.4% 125.12  111.49  12.2% ADR ($) 160.67  147.02  9.3% 179.72  163.70  9.8% OCCUPANCY (%) 67.9% 66.6% 1.3  69.6% 68.1% 1.5      NORTH AMERICA REVPAR ($) 108.66  99.59  9.1% 133.35  121.87  9.4% ADR ($) 159.26  148.20  7.5% 187.27  173.32  8.0% OCCUPANCY (%) 68.2% 67.2% 1.0  71.2% 70.3% 0.9      EUROPE REVPAR ($) 122.74  104.92  17.0% 138.59  117.02  18.4% ADR ($) 185.48  165.18  12.3% 206.87  183.97  12.4% OCCUPANCY (%) 66.2% 63.5% 2.7  67.0% 63.6% 3.4      AFRICA & MIDDLE EAST REVPAR ($) 104.71  83.88  24.8% 104.85  84.01  24.8% ADR ($) 158.70  136.37  16.4% 159.39  136.58  16.7% OCCUPANCY (%) 66.0% 61.5% 4.5  65.8% 61.5% 4.3      ASIA PACIFIC REVPAR ($) 110.10  98.98  11.2% 107.78  96.01  12.3% ADR ($) 158.43  142.24  11.4% 154.63  139.32  11.0% OCCUPANCY (%) 69.5% 69.6% -0.1  69.7% 68.9% 0.8      LATIN AMERICA REVPAR ($) 81.06  72.03  12.5% 90.40  80.74  12.0% ADR ($) 122.82  111.29  10.4% 137.32  124.20  10.6% OCCUPANCY (%) 66.0% 64.7% 1.3  65.8% 65.0% 0.8        (1) Includes same store owned, leased, managed, and franchised hotels   (2) Includes same store owned, leased, and managed hotels Starwood Hotels & Resorts Worldwide, Inc. Owned Hotel Results - Same Store (1) For the Three Months Ended December 31, 2006 UNAUDITED     WORLDWIDE NORTH AMERICA INTERNATIONAL 2006  2005  Var. 2006  2005  Var. 2006  2005  Var.   75 Hotels 44 Hotels 31 Hotels TOTAL HOTELS REVPAR ($) 139.00  125.33  10.9% 137.63  127.63  7.8% 141.80  120.65  17.5% ADR ($) 199.48  183.64  8.6% 197.99  184.33  7.4% 202.49  182.17  11.2% OCCUPANCY (%) 69.7% 68.2% 1.5  69.5% 69.2% 0.3  70.0% 66.2% 3.8    Total REVENUE 511,681  466,202  9.8% 332,035  309,567  7.3% 179,646  156,635  14.7% Total EXPENSES 377,443  355,645  6.1% 245,129  232,357  5.5% 132,314  123,288  7.3%         66 Hotels 35 Hotels 31 Hotels BRANDED HOTELS REVPAR ($) 143.81  128.80  11.7% 144.96  133.47  8.6% 141.80  120.65  17.5% ADR ($) 203.59  187.09  8.8% 204.21  189.75  7.6% 202.49  182.17  11.2% OCCUPANCY (%) 70.6% 68.8% 1.8  71.0% 70.3% 0.7  70.0% 66.2% 3.8    Total REVENUE 478,388  432,510  10.6% 298,742  275,875  8.3% 179,646  156,635  14.7% Total EXPENSES 349,995  328,535  6.5% 217,681  205,247  6.1% 132,314  123,288  7.3%       (1) Hotel Results exclude 50 hotels sold and 10 hotels without comparable results during 2005 & 2006 STARWOOD HOTELS & RESORTS WORLDWIDE, INC. Management Fees, Franchise Fees and Other Income For the Three Months Ended December 31, 2006 UNAUDITED ($ millions)       Worldwide 2006  2005  Variance % Variance   Management Fees: Base Fees 65  41  24  58.5% Incentive Fees 42  27  15  55.6% Total Management Fees 107  68  39  57.4%   Franchise Fees 31  23  8  34.8%   Total Management & Franchise Fees 138  91  47  51.6%   Other Management & Franchise Revenues (1) 23  13  10  76.9%   Total Management & Franchise Revenues 161  104  57  54.8%   Other (2) 48  48  0  -    Management Fees, Franchise Fees and Other Income 209  152  57  37.5%     (1) Other Management & Franchise Fees primarily includes the amortization of deferred gains of approximately $20 million in 2006 and $3 million in 2005 resulting from the sales of hotels subject to long-term management contracts and termination fees.   (2) Other primarily includes revenues from Bliss and other miscellaneous revenue. STARWOOD HOTELS & RESORTS WORLDWIDE, INC. Vacation Ownership & Residential Revenues and Expenses For the Three Months Ended December 31, 2006 UNAUDITED ($ millions)   2006  2005  % Variance   Originated Sales Revenues (1) -- Vacation Ownership Sales 176  153  15.0% Other Sales and Services Revenues (2) 52  29  79.3% Deferred Revenues -- Percentage of Completion 70  (25) n/m  Deferred Revenues -- Other (3) 12  (8) n/m  Vacation Ownership Sales and Services Revenues 310  149  108.1% Residential Sales and Services Revenues 12  43  (72.1%) Total Vacation Ownership & Residential Sales and Services Revenues 322  192  67.7%   Originated Sales Expenses (4) -- Vacation Ownership Sales 109  104  (4.8%) Other Expenses (5) 41  38  (7.9%) Deferred Expenses -- Percentage of Completion 33  (17) n/m  Deferred Expenses -- Other 10  (5) (300.0%) Vacation Ownership Expenses 193  120  (60.8%) Residential Expenses 11  38  71.1% Total Vacation Ownership & Residential Expenses 204  158  (29.1%)     (1) Timeshare sales revenue originated at each sales location before deferrals of revenue for U.S. GAAP reporting purposes (2) Includes resort income, interest income, gain on sale of notes receivable, and miscellaneous other revenues (3) Includes deferral of revenue for contracts still in rescission period, contracts that do not yet meet the requirements of SFAS No. 66 or SFAS No. 152 and, in 2006, provision for loan loss (4) Timeshare cost of sales and sales & marketing expenses before deferrals of sales expenses for U.S. GAAP reporting purposes (5) Includes resort, general and administrative, and other miscellaneous expenses   Note: Deferred revenue is calculated based on the Percentage of Completion ("POC") of the project. Deferred expenses, also based on POC, include product costs and direct sales and marketing costs only. Indirect sales and marketing costs are no longer deferred per SFAS 152 as of January 1, 2006.       Starwood Hotels & Resorts Worldwide, Inc. Worldwide Hotel Results - Same Store For the Twelve Months Ended December 31, 2006 UNAUDITED   System Wide (1) - Worldwide System Wide (1) - North America System Wide (1) - International 2006  2005  Var. 2006  2005  Var. 2006  2005  Var.     TOTAL HOTELS REVPAR ($) 109.66  99.82  9.9% 111.52  101.93  9.4% 106.52  96.30  10.6% ADR ($) 156.51  144.23  8.5% 154.76  143.27  8.0% 159.69  145.96  9.4% OCCUPANCY (%) 70.1% 69.2% 0.9  72.1% 71.1% 1.0  66.7% 66.0% 0.7      SHERATON REVPAR ($) 98.71  89.81  9.9% 101.38  93.38  8.6% 95.53  85.55  11.7% ADR ($) 143.56  131.21  9.4% 143.13  132.28  8.2% 144.11  129.85  11.0% OCCUPANCY (%) 68.8% 68.4% 0.4  70.8% 70.6% 0.2  66.3% 65.9% 0.4      WESTIN REVPAR ($) 127.47  116.62  9.3% 126.64  114.89  10.2% 130.08  122.05  6.6% ADR ($) 176.56  164.24  7.5% 172.64  159.46  8.3% 189.75  180.17  5.3% OCCUPANCY (%) 72.2% 71.0% 1.2  73.4% 72.0% 1.4  68.6% 67.7% 0.9      ST. REGIS/LUXURY COLLECTION REVPAR ($) 215.39  191.22  12.6% 204.55  179.79  13.8% 222.39  198.89  11.8% ADR ($) 318.86  296.40  7.6% 285.84  267.32  6.9% 342.35  317.33  7.9% OCCUPANCY (%) 67.5% 64.5% 3.0  71.6% 67.3% 4.3  65.0% 62.7% 2.3      W REVPAR ($) 212.51  188.87  12.5% 220.86  195.93  12.7% 132.76  121.53  9.2% ADR ($) 280.14  256.55  9.2% 282.83  257.99  9.6% 243.38  236.30  3.0% OCCUPANCY (%) 75.9% 73.6% 2.3  78.1% 75.9% 2.2  54.5% 51.4% 3.1      FOUR POINTS REVPAR ($) 67.91  61.76  10.0% 66.23  60.23  10.0% 72.79  66.23  9.9% ADR ($) 98.33  91.64  7.3% 96.36  89.33  7.9% 103.92  98.37  5.6% OCCUPANCY (%) 69.1% 67.4% 1.7  68.7% 67.4% 1.3  70.0% 67.3% 2.7      OTHER REVPAR ($) 109.89  106.11  3.6% 109.89  106.11  3.6% ADR ($) 132.91  131.43  1.1% 132.91  131.43  1.1% OCCUPANCY (%) 82.7% 80.7% 2.0  82.7% 80.7% 2.0        (1) Includes same store owned, leased, managed, and franchised hotels Starwood Hotels & Resorts Worldwide, Inc. Worldwide Hotel Results - Same Store For the Twelve Months Ended December 31, 2006 UNAUDITED   System Wide (1) Company Operated (2) 2006  2005  Var. 2006  2005  Var.     TOTAL WORLDWIDE REVPAR ($) 109.66  99.82  9.9% 123.27  111.99  10.1% ADR ($) 156.51  144.23  8.5% 172.72  158.84  8.7% OCCUPANCY (%) 70.1% 69.2% 0.9  71.4% 70.5% 0.9      NORTH AMERICA REVPAR ($) 111.52  101.93  9.4% 132.82  121.12  9.7% ADR ($) 154.76  143.27  8.0% 178.26  164.79  8.2% OCCUPANCY (%) 72.1% 71.1% 1.0  74.5% 73.5% 1.0      EUROPE REVPAR ($) 129.20  116.40  11.0% 143.65  128.84  11.5% ADR ($) 192.29  179.57  7.1% 210.31  197.40  6.5% OCCUPANCY (%) 67.2% 64.8% 2.4  68.3% 65.3% 3.0      AFRICA & MIDDLE EAST REVPAR ($) 95.96  84.21  14.0% 96.78  84.98  13.9% ADR ($) 145.48  125.29  16.1% 145.61  124.88  16.6% OCCUPANCY (%) 66.0% 67.2% -1.2  66.5% 68.0% -1.5      ASIA PACIFIC REVPAR ($) 100.07  92.79  7.8% 97.89  91.40  7.1% ADR ($) 148.43  137.07  8.3% 144.30  134.68  7.1% OCCUPANCY (%) 67.4% 67.7% -0.3  67.8% 67.9% -0.1      LATIN AMERICA REVPAR ($) 76.86  67.04  14.6% 85.89  75.09  14.4% ADR ($) 119.48  106.90  11.8% 134.79  118.38  13.9% OCCUPANCY (%) 64.3% 62.7% 1.6  63.7% 63.4% 0.3      (1) Includes same store owned, leased, managed, and franchised hotels   (2) Includes same store owned, leased, and managed hotels Starwood Hotels & Resorts Worldwide, Inc. Owned Hotel Results - Same Store (1) For the Twelve Months Ended December 31, 2006 UNAUDITED     WORLDWIDE NORTH AMERICA INTERNATIONAL 2006  2005  Var. 2006  2005  Var. 2006  2005  Var.   74 Hotels 43 Hotels 31 Hotels TOTAL HOTELS REVPAR ($) 136.33  123.80  10.1% 135.46  122.94  10.2% 138.05  125.51  10.0% ADR ($) 191.56  177.04  8.2% 185.61  170.47  8.9% 204.33  191.38  6.8% OCCUPANCY(%) 71.2% 69.9% 1.3  73.0% 72.1% 0.9  67.6% 65.6% 2.0    Total REVENUE 1,941,796  1,785,090  8.8% 1,255,149  1,148,297  9.3% 686,647  636,793  7.8% Total EXPENSES 1,442,812  1,361,570  6.0% 924,766  868,535  6.5% 518,046  493,035  5.1%         65 Hotels 34 Hotels 31 Hotels BRANDED HOTELS REVPAR ($) 140.20  126.90  10.5% 141.47  127.72  10.8% 138.05  125.51  10.0% ADR ($) 195.70  180.37  8.5% 191.08  174.57  9.5% 204.33  191.38  6.8% OCCUPANCY(%) 71.6% 70.4% 1.2  74.0% 73.2% 0.8  67.6% 65.6% 2.0    Total REVENUE 1,805,444  1,650,788  9.4% 1,118,797  1,013,995  10.3% 686,647  636,793  7.8% Total EXPENSES 1,332,566  1,254,812  6.2% 814,520  761,777  6.9% 518,046  493,035  5.1%     (1) Hotel Results exclude 56 hotels sold and 11 hotels without comparable results during 2005 & 2006 STARWOOD HOTELS & RESORTS WORLDWIDE, INC. Management Fees, Franchise Fees and Other Income For the Twelve Months Ended December 31, 2006 UNAUDITED ($ millions)     Worldwide 2006  2005  Variance % Variance   Management Fees: Base Fees 234  146  88  60.3% Incentive Fees 132  80  52  65.0% Total Management Fees 366  226  140  61.9%   Franchise Fees 118  96  22  22.9%   Total Management & Franchise Fees 484  322  162  50.3%   Other Management & Franchise Revenues (1) 80  40  40  100.0%   Total Management & Franchise Revenues 564  362  202  55.8%   Other (2) 133  139  (6) (4.3)%   Management Fees, Franchise Fees and Other Income 697  501  196  39.1%     (1) Other Management & Franchise Fees primarily includes the amortization of deferred gains of approximately $62 million in 2006 and $12 million in 2005 resulting from the sales of hotels subject to long-term management contracts and termination fees.   (2) Other primarily includes revenues from Bliss and other miscellaneous revenue. STARWOOD HOTELS & RESORTS WORLDWIDE, INC. Vacation Ownership & Residential Revenues and Expenses For the Twelve Months Ended December 31, 2006 UNAUDITED ($ millions)       2006  2005  % Variance   Originated Sales Revenues (1) -- Vacation Ownership Sales 739  620  19.2% Other Sales and Services Revenues (2) 156  112  39.3% Deferred Revenues -- Percentage of Completion 0  (23) n/m  Deferred Revenues -- Other (3) 10  (6) n/m  Vacation Ownership Sales and Services Revenues 905  703  28.7% Residential Sales and Services Revenues 100  186  (46.2%) Total Vacation Ownership & Residential Sales and Services Revenues 1,005  889  13.0%   Originated Sales Expenses (4) -- Vacation Ownership Sales 471  405  (16.3%) Other Expenses (5) 159  129  (23.3%) Deferred Expenses -- Percentage of Completion 0  (16) n/m  Deferred Expenses -- Other 29  (4) n/m  Vacation Ownership Expenses 659  514  (28.2%) Residential Expenses 77  147  47.6% Total Vacation Ownership & Residential Expenses 736  661  (11.3%)     (1) Timeshare sales revenue originated at each sales location before deferrals of revenue for U.S. GAAP reporting purposes (2) Includes resort income, interest income, gain on sale of notes receivable, and miscellaneous other revenues (3) Includes deferral of revenue for contracts still in rescission period, contracts that do not yet meet the requirements of SFAS No. 66 or SFAS No. 152 and, in 2006, provision for loan loss (4) Timeshare cost of sales and sales & marketing expenses before deferrals of sales expenses for U.S. GAAP reporting purposes (5) Includes resort, general and administrative, and other miscellaneous expenses   Note: Deferred revenue is calculated based on the Percentage of Completion ("POC") of the project. Deferred expenses, also based on POC, include product costs and direct sales and marketing costs only. Indirect sales and marketing costs are no longer deferred per SFAS 152 as of January 1, 2006.     STARWOOD HOTELS & RESORTS WORLDWIDE, INC. Debt Portfolio Summary As of December 31, 2006 UNAUDITED   Interest Terms Balance (in millions) % of Portfolio Interest Rate Avg Maturity (in years) Debt   Floating Rate Debt:   Senior credit facility Revolving credit facility Various + .475% $ 435  17% 5.77% 4.1  435  17% 5.77% 4.1    Mortgages and other Various 132  5% 7.10% 1.5    Interest rate swaps LIBOR + 4.23% 300  11% 9.59%   Total Floating 867  33% 7.30% 3.5    Fixed Rate Debt:   Sheraton Holding public debt 449  17% 7.38% 8.9    Senior notes (1) 1,481  56% 6.70% 3.0    Mortgages and other 135  5% 7.49% 8.3    Interest rate swaps (300) -11% 7.88%   Total Fixed 1,765  67% 6.81% 4.6    Total Debt $ 2,632  100% 6.97% 4.4    (1) Balance consists of outstanding public debt of $1.498 billion and a $5 million fair value adjustment related to the unamortized gain on fixed to floating interest rate swaps terminated in September 2002 and March 2004 and a ($22) million fair value adjustment related to current fixed to floating interest rate swaps. Maturities < 1 year $ 805  2-3 years 45  4-5 years 447  > 5 years 1,335  $ 2,632  STARWOOD HOTELS & RESORTS WORLDWIDE, INC. Hotels without Comparable Results & Other Selected Items As of December 31, 2006 UNAUDITED ($ millions)   Properties without comparable results in 2006:   Property Location W New Orleans - French Quarter New Orleans, LA W New Orleans New Orleans, LA St. Regis Aspen Aspen, CO Sheraton Bal Harbour Beach Resort Bal Harbour, FL St. Regis New York New York, NY Caesars Paradise Stream Mount Pocono, PA St. Regis Hotel, San Francisco San Francisco, CA Westin St. John Resort & Villas St. John, Virgin Islands The Westin Resort & Spa, Cancun Cancun, Mexico Sheraton Fiji Nadi, Fiji Westin Royal Denarau Nadi, Fiji   Properties sold or closed in 2006 and 2005:   Property Location 33 Hotels Sold to Host Hotels & Resorts Various Sheraton Denver Tech Center Englewood, CO Deerfield Beach Hilton Ft. Lauderdale, FL Raphael Chicago, IL Sheraton Chapel Hill Chapel Hill, NC St. Regis Washington, DC Washington, DC Sheraton Russell Hotel New York, NY Westin Philadelphia Philadelphia, PA Westin Princeton at Forrestal Village Princeton, NJ Sheraton Ft. Lauderdale Airport Hotel Dania, FL Westin Hotel Long Beach Long Beach, CA Sheraton Suites San Diego San Diego, CA Sheraton Framingham Hotel Framingham, MA Westin Embassy Row, Washington D.C. Washington, DC Westin Atlanta North at Perimeter Atlanta, GA Sheraton Suites Key West Key West, FL Sheraton Colony Square Atlanta, GA Sheraton Colonial Hotel & Golf Club Lynnfield, MA Sheraton Universal Hotel Universal City, CA Hotel Danieli Venice, Italy Sheraton Lisboa Hotel & Towers Lisbon, Portugal Sheraton Cancun Resort & Towers Cancun, Mexico Sheraton Inn Lexington Lexington, MA Sheraton Omaha Hotel Omaha, NE Selected Balance Sheet and Cash Flow Items:   Cash and cash equivalents (including restricted cash of $336 million) $ 519  Debt $ 2,632        Revenues and Expenses Associated with Assets Sold or Closed in 2005 and 2006 or Expected to be Sold in the First Quarter of 2007 (1):     Q1 Q2 Q3 Q4 Full Year Hotels Sold in 2005: 2005  Revenues $ 36  $ 41  $ 28  $ 18  $ 123  Expenses (excluding depreciation) $ 29  $ 27  $ 20  $ 14  $ 90    Hotels Sold in 2006: 2006  Revenues $ 295  $ 71  $ 16  $ 2  $ 384  Expenses (excluding depreciation) $ 227  $ 53  $ 12  $ 1  $ 293    2005  Revenues $ 287  $ 354  $ 318  $ 340  $ 1,299  Expenses (excluding depreciation) $ 224  $ 242  $ 230  $ 240  $ 936    Hotels Classified as Held for Sale at December 31, 2006: 2006  Revenues $ -  $ -  $ -  $ -  $ -  Expenses (excluding depreciation) $ -  $ -  $ -  $ -  $ -    2005  Revenues $ -  $ -  $ -  $ -  $ -  Expenses (excluding depreciation) $ -  $ -  $ -  $ -  $ -    (1) Results consist of 11 hotels sold in 2005, 45 hotels sold in 2006. There are no hotels classifed as held for sale at December 31, 2006. These amounts are included in the revenues and expenses from owned, leased and consolidated joint venture hotels in 2006 and 2005.     STARWOOD HOTELS & RESORTS WORLDWIDE, INC. Capital Expenditures For the Three and Twelve Months Ended December 31, 2006 UNAUDITED ($ millions)   Q4 YTD Capital Expenditures: Owned, Leased and Consolidated Joint Venture Hotels 55  241  Corporate/IT 16  48  Subtotal 71  289    Vacation Ownership Capital Expenditures: Capital expenditures (includes land acquisitions) 26  76  Net capital expenditures for inventory (1) 33  118  Subtotal 59  194    Development Capital 59  168    Total Capital Expenditures 189  651    (1) Represents gross inventory capital expenditures of $107 and $335, less cost of sales of $74 and $217 for the three and twelve months ended December 31, 2006. Starwood Hotels & Resorts Worldwide, Inc. 2006 Divisional Hotel Inventory Summary by Ownership by Brand December 31, 2006     NAD EAME LAD ASIA Total Owned Hotels Rooms Hotels Rooms Hotels Rooms Hotels Rooms Hotels Rooms Sheraton 13  6,298  8  1,711  5  2,713  2  831  28  11,553  Westin 8  4,030  5  1,068  3  901  1  273  17  6,272  Four Points 6  1,153  -  -  -  -  1  630  7  1,783  W 10  3,178  -  -  -  -  -  -  10  3,178  Luxury Collection 1  654  7  828  1  181  -  -  9  1,663  St. Regis 3  668  1  161  -  -  -  -  4  829  Other 10  2,482  -  -  -  -  -  -  10  2,482  Total Owned 51  18,463  21  3,768  9  3,795  4  1,734  85  27,760  Managed & UJV Sheraton 55  28,536  76  22,639  14  2,749  46  15,993  191  69,917  Westin 47  25,616  14  3,708  -  -  13  5,199  74  34,523  Four Points 1  475  6  899  3  428  2  604  12  2,406  W 8  2,269  -  -  1  237  2  330  11  2,836  Luxury Collection 7  1,697  9  1,545  8  298  -  -  24  3,540  St. Regis 5  728  1  95  -  -  2  591  8  1,414  Le Meridien 5  1,058  71  16,912  2  626  24  5,993  102  24,589  Other 3  2,824  1  -  -  -  -  -  4  2,824  Total Managed & UJV 131  63,203  178  45,798  28  4,338  89  28,710  426  142,049  Franchised Sheraton 127  38,974  26  6,663  5  1,655  19  7,097  177  54,389  Westin 29  10,477  3  1,135  3  598  5  1,226  40  13,436  Four Points 85  14,560  11  1,539  9  1,384  2  235  107  17,718  Luxury Collection 1  249  14  1,746  -  -  -  -  15  1,995  Le Meridien 4  1,342  11  3,924  1  213  5  2,772  21  8,251  Total Franchised   246    65,602    65    15,007    18    3,850    31    11,330    360    95,789  Systemwide Sheraton 195  73,808  110  31,013  24  7,117  67  23,921  396  135,859  Westin 84  40,123  22  5,911  6  1,499  19  6,698  131  54,231  Four Points 92  16,188  17  2,438  12  1,812  5  1,469  126  21,907  W 18  5,447  -  -  1  237  2  330  21  6,014  Luxury Collection 9  2,600  30  4,119  9  479  -  -  48  7,198  St. Regis 8  1,396  2  256  -  -  2  591  12  2,243  Le Meridien 9  2,400  82  20,836  3  839  29  8,765  123  32,840  Other 13  5,306  1  -  -  -  -  -  14  5,306  Total Systemwide 428  147,268  264  64,573  55  11,983  124  41,774  871  265,598                                            STARWOOD HOTELS & RESORTS WORLDWIDE, INC. Top 40 Owned and Consolidated Joint Venture Hotels For the Year Ended December 31, 2006   US Hotels   Location   Rooms   St. Regis New York New York, NY 229  St. Regis Aspen Aspen, CO 179    The Phoenician Phoenix, AZ 654    W New York - Time Square New York, NY 507  W Chicago Lakeshore Chicago, IL 520  W San Francisco San Francisco, CA 410  W Los Angeles Westwood Los Angeles, CA 258  W Chicago - City Center Chicago, IL 369  W New Orleans New Orleans, LA 423  W New York - The Court New York, NY 198  W Atlanta Atlanta, GA 275  W New York - The Tuscany New York, NY 120    Westin Maui Resort & Spa Maui, HI 759  Westin Peachtree Atlanta, GA 1068  Westin Horton Plaza San Diego San Diego, CA 450  Westin Galleria Houston Houston, TX 487  Westin San Francisco Airport San Francisco, CA 393  Westin Fort Lauderdale Fort Lauderdale, FL 293    Sheraton Manhattan Hotel New York, NY 665  Sheraton Bal Harbour Beach Resort Bal Harbour, FL 645  Sheraton Kauai Resort Kauai, HI 394    Boston Park Plaza Hotel Boston, MA 941          International Hotels   Location   Rooms   St. Regis Grand Hotel, Rome Rome, Italy 161    Hotel Gritti Palace Venice, Italy 91  Park Tower, Buenos Aires Buenos Aires, Argentina 181  Hotel Alfonso XIII Seville, Spain 147    The Westin Excelsior, Rome Rome, Italy 319  The Westin Resort & Spa, Los Cabos Los Cabos, Mexico 243  The Westin Resort & Spa Puerto Vallarta Puerto Vallarta, Mexico 279  The Westin Excelsior, Florence Florence, Italy 171  The Westin Resort & Spa Cancun Cancun, Mexico 379  Westin St. John Resort & Villas St John, Virgin Islands 174    Sheraton Centre Toronto Hotel Toronto, Canada 1377  The Park Lane Hotel London, England 302  Sheraton On The Park Sydney, Australia 557  Sheraton Buenos Aires Hotel & Convention Center Buenos Aires, Argentina 739  Sheraton Maria Isabel Hotel & Towers Mexico City, Mexico 755  Sheraton Gateway Hotel in Toronto International Hotel Toronto, Canada 474  Le Centre Sheraton Hotel Montreal, Canada 825  Sheraton Paris Airport Hotel Charles de Gaulle Paris, France 252    *Excludes hotels sold to Host   Top 40 hotels represent 85% of owned and consolidated joint venture earnings before depreciation STARWOOD HOTELS & RESORTS WORLDWIDE, INC. Top 20 Worldwide Markets For the Year Ended December 31, 2006   % of 2006 US Assets Total Owned Earnings (1) (2)   New York, NY 13.0% Phoenix, AZ 6.8% Hawaii 6.2% Atlanta, GA 5.6% Chicago, IL 4.5% San Francisco/San Mateo, CA 3.1% Boston, MA 3.0% San Diego, CA 2.8% Miami-Hialeah, FL 2.5% Los Angeles-Long Beach, CA 2.0% Total Top 10 US Markets 49.5%           % of 2006 International Assets Total Owned Earnings (1) (2)   Italy 9.2% Mexico 7.2% Canada 5.9% Argentina 3.2% Australia 2.9% UK 2.7% Spain 1.5% France 1.2% Austria 1.1% Caribbean 0.8% Total Top 10 International Markets 35.7%   (1) Excludes hotels sold to Host (2) Represents earnings before depreciation STARWOOD HOTELS & RESORTS WORLDWIDE, INC. Total Management & Franchise Fees by Geographic Area For the Year Ended December 31, 2006 UNAUDITED   Geographical Area Total Management Fees Total Franchise Fees   United States 43.7% 65.2% Europe 17.9% 14.3% Asia Pacific 15.7% 8.0% Middle East and Africa 15.4% 0.9% Americas (Latin America & Canada) 7.3% 11.6% STARWOOD HOTELS & RESORTS WORLDWIDE, INC. Vacation Ownership Inventory Pipeline As of December 31, 2006 UNAUDITED                                 # Resorts # of Units (1) Brand Total (2) In Operations In Active Sales Completed (3) Pre-sales/ Development (4) Future Capacity (5),(6) Total at Buildout                 Sheraton 7  6  6  2,596  135  1,683  4,414  Westin 11  4  6  751  497  813  2,061  St. Regis 2  1  2  47  -  -  47  Unbranded 3    3    -    124    -    1    125  Total SVO, Inc. 23    14    14    3,518    632    2,497    6,647    Unconsolidated Joint Ventures (UJV's) 2    1    1    198    -    36    234  Total including UJV's   25    15    15    3,716    632    2,533    6,881                                Total Intervals Including UJV's (7)               193,232    32,864    131,716    357,812      (1) Lockoff units are considered as one unit for this analysis. (2) Includes resorts in operation, active sales, and announced new resorts, Sheraton Kauai and St. Regis Punta Mita (UJV) (3) Completed units include those units that have a certificate of occupancy. (4) Units in Pre-sales/Development are in various stages of development (including the permitting stage), most of which are currently being offered for sale to customers. (5) Based on owned land and average density in existing marketplaces (6) Future units indicated above include planned timeshare units on land owned by the Company or applicable UJV that have received all major governmental land use approvals for the development of timeshare. There can be no assurance that such units will in fact be developed and, if developed, the time period of such development (which may be more than several years in the future). Some of the projects may require additional third-party approvals or permits for development and build out and may also be subject to legal challenges as well as a commitment of capital by the Company. The actual number of units to be constructed may be significantly lower than the number of future units indicated. (7) Assumes 52 intervals per unit.