Special items in the fourth quarter of 2008 totaled $133 million of net charges ($0.74 per share) primarily related to $30 million of severance costs, $79 million of impairment charges from discontinued vacation ownership projects, and $86 million of impairment charges primarily at five owned hotels in North America.

The loss from continuing operations was $45 million in the fourth quarter of 2008 compared to income of $146 million in 2007. Excluding special items, income from continuing operations was $88 million for the fourth quarter of 2008 compared to $157 million in 2007.

Net income was $79 million and EPS was $0.43 in the fourth quarter of 2008 compared to $146 million and EPS of $0.74 in the fourth quarter of 2007. The 2008 results include a gain of $124 million (net of taxes) in discontinued operations, resulting from the sale of three hotels which were sold unencumbered by management or franchise agreements.

Frits van Paasschen, CEO said, “In the past year, we have made significant progress in reducing our costs, which enabled us to deliver better than expected quarterly results despite worse than expected REVPAR. Cost reductions completed so far should yield a $100 million reduction in our SG&A on a run-rate basis. Our extensive cost cutting efforts at the property level will help offset some of the margin erosion that results from declining REVPAR. We also scaled back our capital spending in all areas for 2009. While the outlook for 2009 remains challenging, we are prepared for the worst and confident that we will emerge from this downturn stronger than ever. We have experienced operating teams in the field, some of the strongest brands in the lodging industry, and a pipeline that will drive our global fee growth.”

Fourth Quarter 2008 Operating Results

Management and Franchise Revenues

Worldwide System-wide REVPAR for Same-Store Hotels decreased 12.1% (9.1% using constant dollars) compared to the fourth quarter of 2007. International System-wide REVPAR for Same-Store Hotels decreased 10.8% (6.1% using constant dollars). Worldwide System-wide REVPAR increased 8.6% in Africa and the Middle East. Worldwide System-wide REVPAR decreases for the other regions were: 3.3% in Latin America, 13.2% in North America, 14.4% in Asia Pacific, and 17.8% in Europe. Worldwide System-wide REVPAR decreases by brand were: Sheraton 9.6%, Westin 11.4%, Le Méridien 11.5%, Four Points by Sheraton 11.5%, W Hotels 21.1%, and St. Regis/Luxury Collection 23.3%.